The purpose of this Commission is to hear "testimony on the causes and current state of the crisis". Question* for Lloyd C.Blankfein of Goldman Sachs (who will be attending the Commission's first hearing next week):
"Mr. Blankfein, your firm, and others, created and sold bundles of mortgages known as collateralized debt obligations that it simultaneously sold short, or bet against. These C.D.O.’s turned out to be bad investments for the people who bought them, but your short bets paid off for Goldman Sachs.
In the process of selling them to institutional investors, however, your firm lobbied ratings agencies to assign them high ratings as solid bets — even as your firm planned on shorting them.
Could you explain how Goldman bet against these C.D.O.’s while simultaneously trying to persuade ratings agencies and investors that they were good investments? Were they designed from the outset to be shorted by Goldman and possibly select clients? And were those clients involved in helping design these transactions? What explicit disclosures did you make to Standard & Poor’s and Moody’s about your plans to short these instruments? And should we continue to allow transactions in which you’re betting against what you’re also selling?"
*One of a series of questions asked by Andrew Ross Sorkin of the New York Times.
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