Goldman Sachs is challenging the findings of a Senate investigation that criticized the bank for making billions by betting against the housing market during the financial crisis.
The bank argues that the Senate’s Permanent Subcommittee on Investigations presented a misleading picture of Goldman’s behavior during the crisis in a report released in April. The Department of Justice said it was reviewing the report and the New York district attorney reportedly sent Goldman a subpoena this month requesting more information about the report’s allegations.
The subcommittee said that the Wall Street bank made big profits during the financial crisis by betting against the subprime housing market at the same time that it was advising some of its clients to make investments in that market. The report also said that Goldman executives misled Congress about the extent of its bets.
A Goldman employee is telling investigators that the report overstates the bank’s bets against the housing market and misstates the bank’s profits. The firm has passed along its criticism of the report to a number of media outlets; a sharp contrast from its usual hush-hush approach to investigations.
The Senate investigation is just the latest in a string of legal problems facing Goldman. Last year, the bank paid $550 million to settle a Securities and Exchange Commission lawsuit accusing it of selling clients mortgage-backed securities that it knew would go bad. More recently, the New York attorney general has begun investigating the way Goldman and other Wall Street banks packaged and sold mortgage securities during the crisis.
The biggest issue in the Senate report is that Goldman profited during the crisis while its clients and competitors lost billions.
Since the release of the report, the bank’s stock has fallen steadily. Some investors are nervous that the investigations eventually could hurt the company’s ability to do business, analysts said.
An employee of the bank said that the subcommittee investigators added up the bank’s short bets against the housing market and did not include the bank’s long bets in the other direction.
In a separate effort to distance itself from the mortgage meltdown, Goldman announced Monday that it was selling its troubled mortgage servicing unit, Litton Loan Servicing, which it acquired in 2007.