Washington: Goldman Sachs is preparing to defend itself against the US government allegations by arguing that it was unsure where housing prices were headed and did not act against its clients' interests, the Washington Post reported.
Goldman Sachs Group Incorporated has been accused of betting against the housing market while encouraging its clients to invest in securities that would grow in value only if housing prices went up. The Securities and Exchange Commission has filed a fraud suit against Goldman.
In a story posted on its website on Friday, the Washington Post reported that it had obtained an 11-page document that describes how top Goldman executives debated the future of the mortgage market in 2006 and 2007.
The document was drawn up as part of preparation for Goldman chief executive Lloyd Blankfein's testimony this week to the Senate Permanent Subcommittee on Investigations.
In one meeting outlined in the document, financial officer David Viniar met with Goldman's mortgage traders and risk managers on Dec-ember 14, 2006, to discuss strategy.
They decided to reduce Goldman's exposure in the subprime market, the Post reported.
While Goldman did acknowledge shorting the overall market at times, the document says it was temporary and only during periods where Goldman was reshuffling its portfolio, the Post reported.
But while making this shift, critics say, Goldman continued to sell mortgage-related investments to clients interested in the sub-prime loan market, the Post said.
Further, the document said that Goldman seriously considered making new mortgage investments at other times.
While the SEC probe continues, a US government watchdog said on Friday that it would investigate the SEC's fraud lawsuit. Republicans have implied political motives were behind the SEC's decision to sue Goldman.
CEO sued over abacus
Goldman Sachs Group Incorporated Chief Executive Lloyd Blankfein and other bank officials have been sued by shareholders in two lawsuits related to fraud allegations brought by the federal government.
In complaints filed in New York State Supreme Court in Manhattan, Robert Rosinek and Morton Spiegel accused Goldman executives and the bank's entire board of breaching fiduciary duties by letting the bank enter transactions involving risky collateralised debt obligations tied to sub-prime mortgages.
They said the defendants had "engaged in a systematic failure to exercise oversight" over the transactions, known as Abacus, and did not properly vet how the deals were structured and marketed. The plaintiffs also said the officials had failed to ensure Goldman did not represent "conflicting interests."
