Josh Birnbaum, Former Goldman Sachs Employee Testifies

by Amy Judd | April 27, 2010 at 10:49 am

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Josh Birnbaum, a Former Managing Director in the Structured Products Group at Goldman Sachs Testifies at the Senate Hearing

Josh Birnbaum, along with Fabrice Tourre, Daniel Sparks and Michael Swenson, was center stage at the Goldman Sachs hearing on Tuesday April 27 and he gave his testimony about the events leading up to the subprime meltdown where banks and investors lost millions of dollars.

Full Text of Josh Birnbaum's Testimony

Josh Birnbaum was the former Managing Director in the Mortgage Department at Goldman Sachs until March 2008 when he left to start his own advisory firm. He worked for Goldman for almost 15 years and gave no indication that the company was involved in any underhanded deals or knowingly cost anyone any money.

The Senate Permanent Committee on Investigations asked the Goldman Sachs officials why their marketing of mortgage-based investments was so aggressive when the housing market was already beginning to waver and collapse.

During the hearing it seemed as if the Goldman officials were always having to go on the defensive as the meeting quickly turned in to a confrontation about what had happened.

Josh Birnbaum spoke about how in late 2006 and early 2007 he began to develop 'a negative view on the likely direction of the subprime market'. He said that not everyone felt the same, but there was always a 'vigorous debate'.

As the market continued to decline, Mr. Birnbaum said that his department began to accumulate 'short positions', which is protection on individual securities 'through credit default swaps'. When the short positions became too risky, his department was asked to cover them, even though he wanted to maintain them, but Goldman Sachs wanted to reduce their position.

His testimony went on to say:

No one from senior management told me to make a directional bet against the subprime market. Rather, during the 2006-2007 period, regardless of whether our books were long or short, the consistent theme from management was to reduce risk in our books.

I am very proud of the accomplishments of the ABS Group during my tenure there. We provided significant liquidity to our clients in a difficult and challenging market while also managing to post a profit during this period.