Sen Dodd questions on Paulson's role at Goldman

WASHINGTON (Reuters) - Senate Banking Committee Chairman Chris Dodd said on Tuesday that U.S. Treasury Secretary Henry Paulson needs to clear up questions about his former employer's role in originating securities related to subprime mortgages.

Dodd, who also is a contender for the 2008 Democratic presidential nomination, said he was concerned about issues raised in a New York Times column on Sunday, December 2, about the activities of Goldman Sachs in reportedly selling collateralized mortgage obligations (CMOs) while Paulson led the Wall Street firm.

Dodd's presidential committee was sending emails to reporters on Tuesday to raise the matter.

The article, by columnist Ben Stein, said Goldman also was selling the securities short. It said a Goldman Sachs spokesman told the newspaper it "routinely shorts the securities it underwrites and said that this is disclosed."

Paulson headed Goldman Sachs until taking over Treasury last year.

CMOs pool prepayment risks on mortgages and can be bought and sold.

Dodd said he was concerned because it appeared that Goldman Sachs was "aggressively pushing subprime mortgages that they knew to be of concern while simultaneously shorting collateralized mortgage obligations."

If so, it could raise suspicions why the Bush administration's waited until recently to begin initiating a plan to help homeowners who took out subprime mortgages and now face losing their homes because their mortgage loans are due to reset at higher rates, driving up their payments.

Dodd said Paulson should "address the concerns" raised by the New York Times article and added a warning: "Failure to do so may be cause for a formal investigation."

(Reporting by Glenn Somerville; Editing by Neil Stempleman)