- Goldman Charges: Retribution Not Justice

More on the Goldman charges:

First... We can say with some certainty that as the evidence stands today, Goldman probably did nothing illegal. If they had, someone would be up on criminal charges right now. The only remaining question then, and this is the allegation of the SEC suit, is whether what they did was unethical or not.

Second... It seems to me that the question of whether they did something unethical revolves around the role that Paulson & Co played. Yes, Goldman shorted the CDO's they were selling but that's how market making works when the markets are illiquid. Those brilliant traders of the internet chat rooms might not like it, but shorting is not an unethical practice, and it doesn't suddenly become unethical just because you made money doing it. Some Goldman customers lost money, but other Goldman customers made money on the same deal. Some people win... some lose... that's why they call it 'risk management; and not 'certainty management'.

So in effect... if the role that Paulson played wasn't uncommon... if Goldman had other advisers play the same role with regard to the collateralization of other instruments, then that was simply a standard case and Goldman didn't even do anything unethical. I don't know what the standard practices were in that market space... but it doesn't seem unreasonable to me to have your customers tell you what products they would like to buy, and then you design products to meet those specs. We did similar things in the SWAP business continually when I was on the sell side, (back before "Banker" became synonymous with 'enemy of the state') and no one ended up in court over it. To some extent that's just how things work in a custom derivatives market.

Third... None of this will matter in any way because the Frenchman involved is such a massive tool that he's going down if the SEC and the Obama administration have to break every law on the books. The theme today is that all capitalists are evil. If you're a super arrogant, condescending, Jack off of a capitalist, that only makes it worse. They will never let an A-hole like this guy survive an event like this. Obama will personally lead an angry mob of union thugs and community organizers to burn the Goldman building to the ground first.

This isn't going to be about justice... it's going to be about retribution. And this guy is very nearly a perfect target on that score. Unless he's donated all the money to a group of starving community organizers somewhere, he's as good as finished.