Goldman Sachs ‘has a lot to answer for’ says US Senate
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Goldman Sachs made billions from the collapse of the sub-prime mortgage market, according to a US Senate committee.
The US investment bank, which has been charged with fraud by the Securities and Exchange Commission in relation to fixing mortgage related investments, vigorously denies any accusations of it making money from the collapse of the sub-prime mortgage market, the catalyst for the global recession.
Internal Goldman Sachs emails released this week by the US Senate Permanent Subcommittee on Investigation reveal that traders discussed profiting from the impending sub-prime crash.
In response, Goldman released more of its own internal emails that backed up its claims that it had begun to shy away from sub-prime investments. It says it lost $1.2bn (£776m) as a result of the mortgage crash.
But the committee says Goldman did profit from the crash and did mislead investors while shorting its own mortgage positions.
Committee chairman Senator Carl Levin says: “Goldman Sachs, like all the major Wall Street firms, got a multibillion-dollar lifeline from the taxpayers in 2008. Goldman Sachs was slicing, dicing, and selling toxic mortgage-related securities on Wall Street like many other investment banks, but its executives continue to downplay the firm’s role in the financial engineering that blew up the financial markets.
“Goldman Sachs made billions of dollars from betting against the housing market, and it placed those bets in some cases at the same time it was selling mortgage related securities to its clients. They have a lot to answer for.”
Later today Goldman chief executive Lloyd Blankfein will stand before the committee in Washington. He will admit that the SEC charge annoncement was the “worst day in my professional life” but will continue to argue against the charge and the wider charge that Goldman profited from the crash.
Blankfein will say: “We didn’t have a massive short against the housing market and we certainly did not bet against our clients. Rather, we believe that we managed our risk as our shareholders and our regulators would expect.”
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