josh birnbaum

Birnbaum, a native of Oakland, California, joined Goldman in 1993 after completing the undergraduate program at the Wharton School of the University of Pennsylvania in Philadelphia. Thank you for offering me this opportunity to discuss my work in the Mortgage Department at Goldman Sachs in 2006 and 2007, when I was a Managing Director in the Structured Products Group.

During 2006 and 2007, I worked on the Asset-Backed Securities, or "ABS", desk in the Structured Products Group. My job was to make markets for Goldman clients who sought long or short exposure to the market for residential housing asset-backed securities, and to assist in hedging investments made by other parts of the Mortgage Department.
If the client chose to execute the transaction at that price, we would take the other side of the trade. For example, from the inception of the ABX Index in January 2006 through November 2006, customers interested in selling the ABX outnumbered buyers. The trades we made to meet client demands during that period naturally caused the book to develop a long position in the ABX Index and a smaller short position in the single name CDS.

As part of our management of our own inventory, we had the discretion to hedge positions through trades with other clients or keep them on our book in accordance with the limits set by the risk management department. Whenever our inventory got significantly long or short, risk management directed us to cut our risk and "get closer to home," or to "flatten the book."
In late 2006 and into early 2007, I developed a negative view on the likely direction of the subprime market. Not everyone in the Mortgage Department or the firm agreed with my view. In fact, there was a vigorous debate as to the future direction of the market.
When those short positions bumped up against the risk parameters for our book during the Spring and Summer of 2007, my group was instructed to cover them. On both occasions, I expressed my belief that the market would continue to deteriorate and that the better, more profitable trade was to maintain the short position on our book, but the firm insisted that we reduce our position, and we did so.
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. 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.

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'.

As the market continued to decline, Mr. 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.