A newly released set of internal Goldman Sachs emails offers further evidence of how the investment firm knowingly bet big against the housing market--what one top executive called its "big short"--and even wagered against mortgage-tied products of its own creation. The documents, released this morning by a Senate committee investigating Goldman and other investment firms, will fuel charges that Goldman positioned itself against the interests of its clients and most Americans. And while not as severe as the Securities and Exchange Commission's ongoing suit against Goldman, the emails are sure to heap more pressure on the under-fire Wall Street titan.
In one October 2007 email exchange, a member of Goldman's fixed income, currency, and commodities desk, Michael Swenson, discusses the now-infamous mass downgrades of $32 billion of mortgage bonds by the rating agency Moody's that month. Those downgrades all but killed the subprime mortgage market, resulted in huge losses on Wall Street, and woke banks and traders up to the realization that the housing bubble was about to burst. For Goldman, though, that was good news, the emails show. In that same exchange, Swenson says Goldman's asset-backed securities desk "will be up between 30 and 35 [million]" on news of the downgrades. Another Goldman staffer responds, "Sounds like we will make some serious money."
