Goldman Sachs workers discuss market crash in e-mails

As the U.S. housing market turned downward in January 2007, a Goldman Sachs trader wrote in e-mails to a woman he apparently was courting that investments he had sold were "like Frankenstein turning against his own inventor."

"I'm trading a product which a month ago was worth $100 and today is only worth $93," wrote Fabrice Tourre, charged along with the bank in a civil complaint filed this month by the Securities and Exchange Commission. "That doesn't seem like a lot but when you take into account . . . (the investments) are worth billions, well it adds up to a lot of money."

Tourre was talking about investment products like the one at the heart of a federal complaint against his firm. For him, the investments were like an invention gone awry: He had started arranging them when the market was on the upswing. But he continued selling them after the market turned - now with Goldman betting against them, in one case allegedly misleading investors about a deal's origin.

Goldman Sachs Group Inc. released that e-mail and 25 other internal documents yesterday in response to a Senate panel's release of messages in which Goldman executives boast about money they were making as the market imploded later in 2007.

When credit rating agencies downgraded many billions of dollars of mortgage-backed investments in October 2007, Goldman executive Donald Mullen was unabashedly pleased. "Sounds like we will make serious money," he wrote to Michael Swenson, another executive, in one of the e-mails released by the Senate Permanent Subcommittee on Investigations.

Goldman has argued vehemently that it did not profit from the mortgage meltdown.

Swenson and Tourre, along with Goldman chief executive Lloyd Blankfein, will face a public grilling on Capitol Hill on Tuesday from the subcommittee. That comes as the full Senate this week will take up a proposed overhaul of financial regulation intended to toughen oversight of Wall Street and make the financial system more transparent.

Goldman has been in the glare of a particularly unforgiving spotlight since the SEC filed civil fraud charges this month over the investments Tourre was selling and discussing in his e-mail.

The SEC alleges Goldman misled two investors - a German bank and a U.S. bond insurance company - who bought complex mortgage-related products crafted in part by Paulson & Co., a New York hedge fund led by billionaire John Paulson. Paulson was betting the market would collapse. The SEC says Goldman didn't tell the investors Paulson was involved in choosing the investments or that he was betting they would fail.

Goldman has denied wrongdoing, saying it will fight the charges. It has said it lost money on the Tourre deal that the SEC charges address.