Goldman Sachs displays some savvy PR in getting The Wall Street Journal to go big with a story about it pushing back against the Levin-Coburn report.
The paper scoops that Goldman is “considering” putting out documents that contradict key accusations in the Senate’s Levin-Coburn Report. It “might” release them “soon,” though “a decision hasn’t been made yet.”
Those documents, Goldman says, show that the Senate report got it wrong on its activities in the mortgage market in the late stages of the housing bubble. Where Levin-Coburn says Goldman had a “big short” on mortgages, Goldman says it did indeed have a short, it just wasn’t as big as the senators say it was.
According to one document reviewed by The Wall Street Journal, the Senate subcommittee failed to count billions of dollars of bullish positions in mortgage-backed bonds and CDOs when it calculated the firm’s overall holdings for Feb. 26, 2007. Those bullish bets were large enough to offset all of the bearish positions criticized by the subcommittee, according to the document.
For June 25, 2007, Goldman officials believe Senate investigators didn’t take into consideration more than $5 billion of prime, or high-quality, mortgage-backed bonds held by the firm at the time, another document shows.
So were the Levin-Coburn staffers wrong? And if they were wrong, is it something of a technicality—a bit of misdirection to chisel away at the credibility of the entire report, which shows Goldman not telling investors it had adverse interests in the deals it sold them—or does it undermine the whole thing? Were these prime mortages held by a Goldman division other than the mortgage trading desk singled out in Levin-Coburn that bragged about its “big short”? How short was Goldman on subprime mortgages—you know, the ones it was packing into vehicles to fob off on investors?
The Atlantic’s Daniel Indiviglio also raises a good point:
Intent here might also matter more than the actual results. For example, perhaps Goldman would have liked very much to have held a net short position against mortgages, but it couldn’t find enough investors willing to go long on the mortgage market to make that happen at the time the strategy was underway. Perhaps, then, the firm’s shorting strategy only resulted in a mere hedge.
The news beast is so desperate for any scrap of news that it’s apparently worth slapping a story above the fold on C1 reporting that Goldman Sachs is considering releasing some documents.
It will indeed be a story if the bank eventually decides to release them. But what if it doesn’t? The Journal will have been played.
And I’d bet that when this all shakes out, it will show that the Journal got taken for something of a ride by Goldman this morning.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 email@example.com. Follow him on Twitter at @ryanchittum. Tags: Goldman Sachs, Levin-Coburn, Public Relations, The Wall Street Journal