Cross of Gold: How the rush to crucify Goldman Sachs is clouding our judgment and distorting public policy.
Imagine that you want to make a bet against a sports team, say the New York Yankees. The Yankees have had a strong run, but, poring over the data, you have come to the conclusion that they’re going to start losing. So you go to a bookmaker (in a district where bookmaking is legal, of course) to place a bet. The bookmaker now looks for someone to take the other side of this bet. Once the other party is found, the deal is made. That, in essence, is the transaction that took place in 2007 regarding the future direction of the American residential-housing market, in which Goldman Sachs acted as the bookie, and which the Securities and Exchange Commission now charges was “fraud.”
Kind of allays the populist rage that consumes me when I think about this. Kind of. Perhaps the real problem is that I don’t understand what investment bankers actually do.
