Your Charles Krauthammer moment. But first give me a few paragraphs to set up today’s GS hearings. I will not defend Goldman Sachs. But what occurred in today’s Senate hearings today was a day of nonsense. Once again the Senate dodges its role and responsibility by demonizing another. In the past it was AIG, BOA and Merrill Lynch. Today it was Goldman Sachs.
Let me say I have always had a problem with index funds, and synthetic financial instruments backed by nothing more than trading activity. Selling short has never been a family trait. Betting on failure has never been an option.
But I do understand the role played in futures trading as well as commodities trading and hedging. Make no mistake hedging is critical to a smooth flowing economy, Without it farmers would never survive a draught, airlines would never survive a gas spike, and investment banks could find themselves wiped out and a source of needed capital eliminated.
Thus I am perplexed by the Senate outrage today when they talk about GS “bilking customers”, by betting on failure. First of all, every customer (all institutions) was well aware of the risk, which is why trading is limited to “the wealthy”. Clearly e-mails show GS was selling instruments that some thought were crap. But even GS wasn’t positive. They held em too. And the buyers clearly thought the risk was well worth the reward at the end of the rainbow.
But the argument today never focused on the role these instruments played in the crisis. Just on GS’s ethics in trading them. Which makes the hearings a day long gas bag fest. A point that Charles Krauthammer makes more eloquently than I. I’ve included Levin’s potty mouth just to set up Charles.
As Charles points out, let’s not forget that ground zero in this whole financial meltdown started when Fannie Mae and Freddie Mac encouraged low interest, high risk loans, repurchased them, packaged them and sold them as investments. Wall Street followed. GS was just one small part of a big money grab that has the Federal Government as a facilitator.