Goldman Sachs’ trading activities in the credit insurance market in 2007 have come under attack from a US senator after e-mails showed a senior trader urged colleagues to “kill” some investors’ positions.

Carl Levin, chairman of the Senate permanent subcommittee on investigations, told a hearing on Wednesday that the alleged activity “looks like a trading abuse to me”, although he added that at the time the credit insurance market was unregulated.

Mr Levin said that in May 2007, Goldman adopted a “short squeeze strategy” to drive down the price of credit default swaps on troubled mortgage-backed securities. Mr Levin alleged that the move, which Goldman denies, would have enabled the bank “to purchase the CDSs for itself at artificially low prices”.