Goldman Profiting Big from Mortgage Mess - WSJ

Rather than a being a financial catastrophe as the subprime mortgage mess has been for most brokerages, Goldman Sachs (GS) is raking in one of the industry's biggest profits in years thanks to a "tiny group of traders," according to a Wall Street Journal report. The group of 16 structured-products traders' bets against mortgage-backed securities are seen resulting in a profit of nearly $4 billion, according to sources familiar with Goldman's financing. The profits in turn, will offset mortgage-related losses of $1.5B to $2.0B at other divisions. The Journal explains the structured-products group's mission is to make markets for clients, but it also can invest company capital to exploit opportunities, even if the trades are in the opposite direction of clients', as in the case of subprime-mortgage securities. Goldman reports fiscal Q4 results on Tuesday and the earnings are expected to boost the firm's annual net income to more than $11B. Shares of Goldman Sachs lost 1.9% to $208.48 on Thursday.

Sources: Wall Street Journal, MarketWatch
Additional Reading: Goldman CEO Sees No Significant Writedowns; Still Short Subprime • Asset Managers and Brokers Graded on SIV Exposure • Goldman Steals the Show

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