Senator Carl Levin released emails yesterday showing a Goldman Sachs executive exhorting his traders to engineer a short-squeeze

The Wall Street Journal stuffs it on C3 and gives it this loopy headline:

Goldman Trader Used Rough Language

Heavens!

That hed has the effect of downplaying the story. So does the fact that the Journal says a “Goldman trader” did it rather than a “Goldman executive,” which is what Michael Swenson actually was, as might be clear from the Journal’s lede description of him as running “Goldman Sachs Group Inc.’s asset-backed securities trading desk during the subprime-mortgage crisis.”

Swenson was one of the Goldman executives called to testify to Congress back in April.

The Financial Times is quite a bit better (The New York Times doesn’t have the story), putting the story on page one with a headline that actually explains what the story is:

Goldman attacked over ‘trading abuse’ in credit insurance market

It also calls Swenson a “senior trader” in its lede, though it calls him an executive later in the story.

This isn’t just a semantic distinction. If the person in question is a “trader,” Goldman Sachs can more easily slough it off as a rogue employee. If the person’s an “executive,” that’s much harder for them to explain away.

The Journal gets another big thing wrong, too, as my colleague Felix Salmon, over at his other joint, points out. It says Goldman wanted to “to bet that the market would suffer.” That’s the exact opposite of what it did. It bet that the market would recover. It was trying to squeeze the short-sellers who thought the market would suffer. That ought to be corrected.

Here’s the FT on what Swenson the Goldman Executive said:

“We should start killing the . . . shorts in the street,” Mr Swenson wrote in an e-mail to Deeb Salem, a trader, in May 2007. “This will have people totally demoralised.”

In another e-mail, he said Goldman should reduce prices on CDSs to “cause maximum pain” for existing holders of credit insurance.

And that’s in an email. You have to bet undocumented conversations are even more interesting.

Goldman’s defense strategy is to admit that the emails are “terrible” but that nothing happened. Even if that’s true, though, it lifts the curtain on the culture there.

Over at Naked Capitalism, Tom Adams and Yves Smith raise an interesting question about the timing here. Swenson sent the emails in May 2007, a couple of months after the market started to go haywire. But Goldman still had some toxic assets to unload:

Levin understood the implications, that damaging the shorts would allow Goldman to buy CDS even more cheaply, but did not tease out the logical conclusion. This move was likely a major step that allowed Goldman (and fellow dealers not under investigation who likely pursued parallel strategies) to package its remaining mortgage dreck into CDOs, which were launched as the reported squeeze evidently took place, and unload as much toxic inventory as possible before the wheels came hopelessly off the subprime bandwagon.

It’s just a theory. But it’s a very interesting one, and it’s worth further inquiry.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.