Blankfein E-Mail Shows Firm Profited Betting Against Mortgages

(Bloomberg) -- Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd Blankfein told colleagues in an e-mail that the firm made money by shorting, or betting against, mortgages, according to documents obtained and released today by a U.S. Senate subcommittee.

“Of course we didn’t dodge the mortgage mess,” Blankfein, 55, wrote in an e-mail dated Nov. 18, 2007, that was among eight pages of documents released today by the Senate’s Permanent Subcommittee on Investigations. “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.”

Goldman Sachs, the most profitable securities firm in Wall Street history, has come under scrutiny for its sales of collateralized debt obligations linked to mortgages during 2007, just as the market for such instruments started to crumble. Blankfein, 55, and six current and former employees will face questioning next week about its business practices by the subcommittee, led by Michigan Democrat Carl Levin, 75.

On April 16 the Securities and Exchange Commission sued the firm for fraud, alleging that the company and an employee, Fabrice Tourre, misled investors about a CDO. Goldman Sachs has contested the allegations, arguing that the investors had all the information they needed and that the firm would never mislead investors.