If the goal of the marathon Senate grilling of Goldman Sachs was for Sen. Carl Levin (D-Mich.), to prove that Goldman was net short the housing market in 2007, then yes, despite Lloyd Blankfein’s futile attempts to downplay the big short, split hairs, net things out, or plainly obfuscate, at the end of the hearing, the very end, the bitter end, papers shuffling, lawyers whispering, hearts pounding, a biblical tediousness raining down on the Dirksen Senate building, it was clear: Goldman was short, in 2007, at the peak of the housing bubble, and profited, substantially.
Instead of trying to posture Goldman as neutral market maker (and not market mucker upper, as Sen. Claire McCaskill, a Democrat from Missouri said) or arguing that the longs and shorts were always to be considered alongside each other over rolling periods, Blankfein might have been better off saying “you’re damn right I ordered the code red!”
Or at least smiled and said, Senator, all due respect, we’re a for-profit business, but yeah, we pushed some bad deals out the door and injected some high stakes craziness into the financial system. We are Long-Term Capital Management, and they are us, and this time we have learned our lesson. Goldman has delevered. There are no more synthetic CDO-squared products sold by Goldman or anyone else, and that has nothing to do with Levin’s line of questioning. What’s the next scheme? One man’s scheme is another’s dream, and for millions of people it’s the same thing, to make money. Goldman need not be embarrassed by that.