Goldman Sachs used Timberwolf on Bear Stearns and crushed them to bankruptcy

http://www.marketwatch.com/story/goldman-made-big-profits-shorting-cdos-levin-2010-04-26?reflink=MW_news_stmp

Goldman Sachs Group Inc. made $3.7 billion betting against mortgage-related securities as the housing market started to collapse, according to an estimate released Monday by an influential Congressional subcommittee.

One of the securities, known at Timberwolf I, was described as a “shi**y deal” by a senior Goldman executive at the time Thomas Montag, according to an email disclosed Monday by the Senate’s Permanent Subcommittee on Investigations. Montag is now president of Global Markets at Bank of America Merrill Lynch .

Goldman has been under fire since the Securities and Exchange Commission charged the investment bank with securities fraud, alleging it didn’t tell investors in a collateralized debt obligation that hedge fund firm Paulson & Co. helped structure the deal and was betting against it.

Goldman and Paulson have denied any wrongdoing, but Goldman executives including Chief Executive Lloyd Blankfein are being hauled in front of the Permanent Subcommittee on Tuesday.

Carl Levin, chairman of the committee, estimated Monday that Goldman made about $3.7 billion from short positions in several CDOs in 2007.

“Goldman made a lot of money by betting against the mortgage market,” Levin said in a statement.

However, the $3.7 billion estimate doesn’t include other losses the investment bank suffered when it sold mortgage-related securities. Indeed, Goldman disclosed its quarterly residential mortgage results for 2007 and 2008 to try to counter Levin’s claim. The firm said the results show net losses of more than $1.2 billion during those years.

“We obviously could not have been significantly net short since we lost money in a declining housing market,” Goldman spokesman Lucas van Praag said in a statement. “The U.S. Senate Subcommittee has cherry-picked just four e-mails from the almost 20 million pages of documents and e-mails provided to it by Goldman Sachs. It is concerning that the Subcommittee seems to have reached its conclusion even before holding a hearing.”

One email disclosed by the subcommittee was about Timberwolf I, a hybrid CDO that Goldman underwrote and sold in the first quarter of 2007.

Goldman was the short investor for many of the underlying assets in the CDO, according to the subcommittee.

Goldman sold roughly $300 million Timberwolf securities to Bear Stearns hedge funds. Within five months of the CDO’s issuance, it lost 80% of its value and the Bear Stearns hedge funds collapsed.

“Boy that timeberwof [sic] was one shi**y deal,” Montag wrote in an email in June 2007.

The Goldman trader responsible for managing the deal later described the day that Timberwolf was issued as “a day that will live in infamy,” according to another email.

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the “shitty” deal that made billions for GS..and crushed the life out of bear stearns..somebody had to take the heat..they chose bear stearns..and duly sank them..and thats how the game is played..derivatives..weapons of mass destruction..

401

~ by seeker401 on April 30, 2010.