Goldman chief says bank did not bet against clients

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The Independent Online

Goldman Sachs has launched a vigorous defence of its mortgage derivatives trading in the run-up to the financial crisis, saying it never "bet against" its clients.

The bank, the most powerful and profitable on Wall Street, used its annual report to tackle the many public criticisms of its actions, including a line of questioning taken by the chairman of the Financial Crisis Inquiry Commission at its first hearings earlier this year.

Phil Angelides, the FCIC chairman, likened Lloyd Blankfein, the Goldman Sachs chief executive, to "a used car salesman" for selling what turned out to be toxic mortgage derivatives to investors around the world, even while the firm itself was making bets against the same financial instruments.

In a 10-page letter to shareholders, Mr Blankfein said Goldman's trading had been dictated in the main by its business for clients. "The firm did not generate enormous net revenues or profits by betting against residential mortgage-related products," he wrote. "Our relatively early risk reduction resulted in our losing less money than we otherwise would have when the residential housing market began to deteriorate rapidly." The annual report also insists that the firm did not profit from AIG's bailout – except in the sense that AIG's failure could have been catastrophic for the markets.

Wall Street banks are using this reporting season to pen long letters to shareholders in an attempt to repair their image. Jamie Dimon, chief executive of JPMorgan Chase, wrote a 36-page letter last month.