Tags: Goldman | Bet | Against | Clients | crisis

Goldman Denies It ‘Bet Against’ Clients in Meltdown

Wednesday, 07 Apr 2010 08:06 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Goldman Sachs Group Inc. said it did not intentionally "bet against" securities in the mortgage market during the financial crisis, dismissing suggestions that it unfairly made money by placing bets against its clients.

"As a market maker, we execute a variety of transactions with clients and other market participants ... which may result in long or short risk exposures to thousands of different instruments at any given time," Goldman said in an annual letter to its shareholders.

Goldman said it did not generate enormous net revenue or profit by betting against residential mortgage-related products.

However, following its decision to reduce its exposure to risky mortgage securities, the bank said it lost less money than it otherwise would have when the residential housing market began to deteriorate rapidly.

In January, Goldman Chief Executive Lloyd Blankfein faced harsh questioning from the chairman of the Financial Crisis Inquiry Commission, who accused Goldman of knowingly creating shoddy subprime-backed securities for customers, and then betting they would default.

In the letter to shareholders, Goldman also defended its relationship with the bailed out U.S. insurer AIG and said the bank bought protection on super-senior collateralized debt obligation (CDO) risk only as part of a trading relationship.

"This protection was designed to hedge equivalent transactions executed with clients taking the other side of the same trades. In so doing, we served as an intermediary in assisting our clients to express a defined view on the market," Goldman said.

Many banks, including Goldman, were among the recipients of tens of billions of federal bailout dollars that were funneled through the insurer at the height of the crisis, saving them from potential losses and causing a public uproar.

The bank said its total exposure on the securities on which it bought protection was roughly $10 billion and it held about $7.5 billion in collateral from AIG. The remainder was covered through other hedges entered with various counterparties.

"If AIG had failed, we would have had the collateral from AIG and the proceeds from the Credit Default Swap (CDS) protection we purchased.

Therefore, we would not have incurred any material economic loss," Goldman said.

© 2014 Thomson/Reuters. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Hope for Democrats? Wasserman Schultz Won't Stop Believing

Thursday, 23 Oct 2014 15:15 PM

As election analysts are predicting a good day for Republicans on Nov. 4, Democratic National Committee Chairwoman Debbi . . .

Martha Coakley Trailing in Latest Mass. Gubernatorial Poll

Thursday, 23 Oct 2014 14:46 PM

Democrat Martha Coakley may be on the verge of losing another statewide election in Massachusetts if the result of the l . . .

Rand Paul Tries to Peel Away Isolationist Label

Thursday, 23 Oct 2014 14:42 PM

Sen. Rand Paul is taking on critics who brand him an isolationist on foreign policy, advocating an approach for America  . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved