The old political morality play staged a brief comeback on Capitol Hill Tuesday. Members of the Senate Permanent Subcommittee on Investigations played the good guys. Worthies from Goldman Sachs were the villains.
Democrats and Republicans alike spent a long day pummeling the financiers for their part in the Wall Street frenzy that profited them handsomely even as the housing market plummeted at great cost to the economy and average Americans.
The politicians' outrage transcended the bankers' contrition, which was largely confined to vulgarities in some e-mail. In a classic example of talking past each other, the senators seized on the financiers' marketing of exotic investment vehicles -- some designed to profit from declines in value -- as disingenuous if not immoral.
The Goldman cadre sniffed at such quibbles. They were just serving the market and their own interests and anyone who bought what they were selling was sophisticated enough to know the risks.
Yet in e-mails Fabrice Tourre, the public face of the Securities and Exchange Commission's civil fraud case, admitted not "necessarily understanding all the implications of these monstruosities [sic]," which he joked about selling to "widows and orphans that I ran into at the airport."
The self-proclaimed "Fabulous Fab" was not alone in failing to grasp the toxicity of the more arcane investment vehicles Wall Street dreamed up and profited from. But bundling high-risk mortgages and creating securities such as collateralized debt obligations, which were then guaranteed by third parties, multiplied risk and the economic damage when the housing bubble burst.
Such fanciful creations, which serve no economic purpose other than lining financiers' pockets, should be a main target of the market reform legislation the Senate is moving, ever haltingly, to adopt.