Goldman restated its position that it did not reap huge profits from bets against the market.

Short positions

As the housing bubble burst, Goldman and a few powerful hedge funds took short positions on the market, which are bets that the market will go down.

Many of those bets required other investors to bet the market would rise, and when the market went bust, people with short positions, like Goldman Sachs, made money on their bets.

One of those bets is at the heart of civil fraud charges the Securities and Exchange Commission (SEC) filed against Goldmanthis month.

The SEC alleges Goldman misled two investors who bought a complex mortgage-related product that was crafted in part by Paulson & Co, a New York hedge fund led by billionaire John Paulson.

The hedge fund manager was betting the product would fail.

The SEC said that Goldman did not disclose Paulson's role in creating the deal or his negative bet to the investors, IKB Deutsche Industriebank AG, a German bank, and ACA Management LLC, a US bond insurance company.

The deals, called Abacus, led to investors losing $1bn.

'Widows and orphans'

Goldman also released a series of emails from Fabrice Tourre, the trader at the heart of the SEC charges.

In them, Tourre jokes about selling investments to "widows and orphans" when he already expected the market to go bust.

In an email dated March 7, 2007, he wrote that Dan Sparks, leader of Goldman's US subprime business, said the business "is totally dead, and the poor little subprime borrowers will not last so long!!!"

That April, he joked about the bonds the SEC charges he misled clients about.

"I've managed to sell a few abacus bonds to widows and orphans that I ran into at the airport, apparently these Belgians adore" the complex investments, Tourre wrote.

The emails are in a mixture of French and English, and are to a woman with whom Tourre appeared to be romantically involved. Goldman provided translations.

The same emails were excerpted in the SEC's complaint against Goldman, but the full context was not reported previously.

The subcommittee, whose probe is not connected with the SEC's, has been investigating the causes of the financial crisis for 18 months.

Its fourth and final hearing on Tuesday will include testimony from Blankfein and Tourre.