The Senate Subcommittee investigating Goldman Sachs has released a 901-page document of exhibits from today’s hearings. Inside, we have a treasure trove of information that gives a rare glimpse into the life of Goldman Sachs.
In it there’s a 2006 presentation called “Plan for 2006” for a company called Long Beach Mortgage, which was a subsidiary of Washington Mutual (page 844).
On page 848, Goldman discusses the 2006 landscape of the subprime mortgage industry. Spelled out in bold and caps is a section that says “The oft predicted, overly anticipated subprime blow up MAY occur.” Clearly Goldman knew what was going on here. It’s a bit contradictory because while Goldman claims that the subprime market will “fizzle out” rather than blow up, it concludes the section saying: “Some will win (eventually) and many will lose.”
For those unaware of Long Beach Mortgage, the Justice Department went after them for targeting minorities and giving them subprime loans. You can read all about that at Justice.gov.
All that sounds somewhat bad, but basically what it’s saying is: Yes, Goldman was negative on housing (everyone knows this already), but Goldman was not so negative that it realised the whole system was going to blow up. It new there was an opportunity to “win,” but they also figured the crisis would fizzle out.
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