Probe: Goldman noted gains during downturn

WASHINGTON, April 24 (UPI) -- Goldman Sachs executives exchanged e-mails about the firm's profiting by betting against housing markets in 2007, a congressional investigation found.

Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, said four internal e-mails released Saturday belie Goldman's claim it did not try to profit from the sharp decline in housing.

"Goldman made a lot of money by betting against the mortgage market," Levin said in a statement. "Investment banks such as Goldman Sachs were not simply market-makers. They were self-interested promoters of risky and complicated financial schemes that helped trigger the (financial) crisis.

"They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities and sold them to investors."

That, in turn, magnified and spread risk "throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients," Levin said.

The New York Times reported Lloyd Blankfein, Goldman Sachs chairman and chief executive officer, wrote in a Nov. 18, 2007, e-mail: "Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts. Also, it's not over, so who knows how it will turn out ultimately."

In a message dated July 25, 2007, David A. Viniar, Goldman's chief financial officer, noted the company had made $51 million profit in a day by betting securities tied to mortgages would drop."Tells you what might be happening to people who don't have the big short," Viniar wrote to Gary D. Cohn, now Goldman's president.

Release of the e-mails comes as Goldman prepares for a Tuesday congressional hearing scrutinizing the firm's actions in the context of the "role of investment banks in contributing to the worst U.S. economic crisis since the 1930s," Levin said.

Blankfein and other current and former company employees are to testify.