Saturday, April 24, 2010

Senator Levin Releases Goldman Sachs Emails

The Senate Permanent Subcommittee on Investigations, headed by Senator Carl Levin (D-Michigan), fresh from its grilling yesterday of executives from the credit rating agencies, has released several emails from Goldman Sachs on a Saturday, no less. Cannon fodder for the Wall Street firing squads on the Sunday talk shows, perhaps?

There is no "smoking email," as it were, but a lot of grist for the mills in the Obama Administration, Congress and their cheerleaders in the media to vilify Wall Street, with Goldman Sachs as the preferred target of the moment.

A July 25, 2007 email from chief financial officer David Viniar is already burning up the wires from the Associated Press in an article by Dan Strumpf titled "E-mails show Goldman boasting as meltdown unfolds."

See AP story here: http://apnews.myway.com//article/20100424/D9F9GVN80.html

The mortgage-backed securities and mortgage collateralized debt obligation (CDO) markets were beginning to seriously tank in late July, ahead of a complete meltdown only a few weeks later.

One email Gary Cohn at Goldman Sachs forwards to CFO Viniar contains information describing the dramatic plunge in the value of mortgage-backed securities in an unindentifed deal. The email also noted a 95 percent wipe-out of the deal's residuals, the parts that are sometimes retained by companies that put together the deals because they are hard to sell.

In response to the collapse of these mortgage bonds, Viniar comments: "Tells you what might be happening to people who don't have the big short."

Reporting on another email on November 18, 2007, from Lloyd Blankfein, Goldman's chairman, AP reporter Strumpf sees the comments as boasting, giving more support to the article's theme of Wall Street gloating while America was burning.

Bankfein writes: "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."

While Blankfein is happy about Goldman's experience so far, it seems a stretch to portray this as boasting.

Take a look at the context for the statement. The email is in response to an internal email notice about a positive story on how Goldman Sachs dodged the bullet in the mortgage meltdown being written by Jenny Anderson and Landon Thomas and slated for publication the next day in the New York Times.

Blankfein was pointing out that the conclusion of the article was not factually correct and, indeed, even with the protection of its big shorts, Goldman might still see big losses -- as they ultimately did.

The Blankfein email inadvertently exposes the shallowness of the reporting by the New York Times, whose reporters seem to rush to a premature conclusion about a company that previously had often enjoyed favorable coverage in their pages. It also reveals that the reporters had pretty much conveyed to Goldman ahead of publication just how they planned to portray the investment banking firm in their article.

The leaked emails are available online at this link:
http://levin.senate.gov/newsroom/supporting/2010/PSI.Exhibits.pdf

The release of these emails, while entertaining, also serve as a reminder of the unattractive sanctimoniousness of Senator Levin and the other members of Congress who have had a field day grilling people who may or may not have contributed materially to the mortgage and financial market meltdowns.

Too bad there is no one to compel Congress to release its emails and statements made in private that showed how they wanted to "roll the dice" with lending standards for affordable housing at Fannie Mae and Freddie Mac, as Representative Barney Frank (D-Mass.) once gleefully said.

It would also be nice to see on prime-time TV people from Main Street grilling members of Congress about emails and statements that showed how cavalier they were about potential future losses from concerted and relentlesss efforts to pressures lenders to lend money to people who could not pay back the loans.

With a Congress complicit in the crisis doing the grilling, one almost feels sorry for the people on Wall Street who helped enginer and then compound the mortgage disaster that are paraded before us in a humiliating public display. But, not quite.

The least these harradans in Congress can do when they summon people to stand before them for grilling is be fair and even-handed.

If they were to show a degree of impartiality, it would be a shock and might improve the standing of Congress in the eyes of the American people. They won't, of course, because they do not appear to want to craft a bill that is thoughtful and measured and actually responds to the causes of the crisis. It's too much fun playing God with the lives of other people to actually get serious about the real issues.

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