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By Sebastian Mallaby
Published: January 12 2011 20:31 | Last updated: January 12 2011 20:31
For sheer, toe-curling embarrassment, it's hard to choose between last year's populist attack on Goldman Sachs by the US Securities and Exchange Commission and this week's cringe-worthy response from the investment bank.
Last April, when the SEC filed suit against Goldman, the bank could have fought back. The suit complained it had sold fancy mortgage securities without disclosing that a hedge-fund manager, John Paulson, was betting that those same securities would blow up. To which Goldman could have answered: so what? Any time an investment bank sells any derivative, it should be obvious to the buyer that somebody somewhere must be taking the other side. The SEC's assertion that Goldman had misled customers about the nature of Paulson's involvement was potentially more damaging, except that the SEC produced no evidence to make this charge stick.
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