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net-short the market in residential mortgage-related products in 2007 and 2008. Our performance in our residential mortgage-related business confirms this. During the two years of the financial crisis, while profitable overall, Goldman Sachs lost approximately $1.2 billion from our activities in the residential housing market. We didn’t have a massive short against the housing market, and we certainly did not bet against our clients.”
    In a separate interview, Blankfein said the decision to mitigate the firm’s risk to the housing market in December 2006 has been “overplayed” and was just a routine decision. “It’s what you do when you’re managing risk, and a huge part of risk management is scouring the P&L every day for aberrations or unpredicted patterns,” he said. “And when you see something like that, you call the people in the business and say, ‘Can you explain that?’ and when they don’t know, you say, ‘Take risk down.’ That’s what happened in our mortgage business, but that meeting wasn’t significant. It was rendered significant by the events that subsequently happened.”
    In fact, Goldman’s decision to short the mortgage market, beginning around December 2006, was anything but routine. One former Goldman mortgage trader said he does not understand why Goldman is being so coy. “Their MO is that we made as little money as possible,” he said. “[So,] anything that makes it look like they didn’t make money or they lost money is good for them, right? Because they don’t want to be seen as benefiting during the crisis.”
    For his part, Senator Levin said he remains mystified by Blankfein’s denials when the documentary evidence—including e-mails and board presentations—points overwhelmingly to Goldman having profited handsomely from the bet. “I try to understand why it is that Goldman denies, to this day, making a directional bet against the housing market,” he said in a recent interview. “They don’t give a damn much about appearances, apparently, on a lot of things they did, but at any rate, I don’t get it. Clearly [Goldman] made a directional bet and … they lied. The bottom line: They have lied. They’ve lied about whether or not they made a directional bet.” He said his “anger” about Goldman is “very deep” because “they made a huge amount of money betting against housing and they lied about it, and their greed is incredibly intense.”
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    D ESPITE HAVING “the big short,” Goldman and Blankfein could not avoid the tsunami-like repercussions of the crisis. On September 21, 2008, a week after Bank of America bought Merrill and Lehman Brothers filed for bankruptcy protection—the largest such filing of all time—both Goldman and Morgan Stanley voluntarily agreed to give up their status as securities firms, which required increasingly unreliable borrowings from the market to finance their daily operations, to become bank holding companies, which allowed them to obtain short-term loans from the Federal Reserve but, in return, required them to be more heavily regulated than they had been in the past. Goldman and Morgan Stanley made the move as a last-ditch, Hail Mary pass to restore the market’s confidence in their firms and stave off their own—once unthinkable—bankruptcy filings. The plan worked. Within days of becoming a bank-holding company, Goldman raised $5 billion in equity from Warren Buffett, considered one of the world’s savviest investors—making Buffett the firm’s largest individual investor—and another $5.75 billion from the public.
    Weeks later, on October 14, Treasury Secretary Paulson summoned to Washington Blankfein and eight other CEOs of surviving Wall Street firms, and ordered them to sell a total of $125 billion in preferred stock to the Treasury, the funds for the purchase coming from the $700 billion Troubled Asset Relief Program, or TARP, the bailout program that Congress had passed a few weeks earlier on its