Senator Carl Levin Outrageously Outraged Over Emails

This is Kabuki theater at its' finest. If someone mentions Coke cans we're right back to the days of theatre d'absurde we remember from the Clarence Thomas hearings. Alas, no one on the Investigations Committee could dredge up a story quite as provocative as the Coke can folklore to facilitate their public annihilation of Goldman Sachs. Instead we have an email containing a damning description of a Goldman mortgage-backed security named "Timberwolf." Timberwolf, Senator Levin wants us to know, was described as a "sh*tty deal" in the email." How does he make this point, he repeats the phrase 11 times in every variation of a question he can think of.

None of this proves anything criminal took place but it sure does make for fine political theater.  The left-wing economic guru, Paul Krugman concedes there is nothing to see in the emails.  We should instead be focused on the emails of the rating agencies that gave AAA ratings to these "sh*tty deals."    Don't hold your breath waiting for the rating agencies to be hauled before the Investigations Committee.  The bill doesn't bother to address the agencies and their role in the economic collapse.   It might just be a bit awkward to bring them in for a beating.  Of course, the rating agencies don't have quite the same effect when it comes to ginning up that populist pitchfork outrage either.   That leaves Goldman Sachs to take the fall for the failures of many different agencies *and* the government that created the policies that set the train wreck in motion.

How's that investment in the Obama administration working out for you Goldman Sachs?

“They have a bazooka and you have a water pistol.”

It isn't a fair fight  when government battles the private sector.  Ask anyone in the insurance industry.   Where the insurers fell flat, however, was in their failure to fight back.  Goldman Sachs doesn't appear to want to repeat the same mistake.  Responding to a Friday dump by the Senate Investigative Committee that flooded the news with stories Goldman Sachs profited while the financial markets melted down, Goldman Sachs released internal documents intended to refute what they will argue is a politically motivated attack on the firm:

The material, consisting largely of internal e-mail traffic, is meant to refute allegations by a Senate investigation committee, which claimed on Saturday that Goldman had made big profits betting against the mortgage market, which subsequently crashed.

The Securities and Exchange Commission has also alleged that Goldman fraudulently failed to disclose that a hedge fund influenced the composition of a subprime mortgage security underwritten by the bank. Mr Blankfein is expected to launch a strong defence of the bank on Tuesday, fighting to preserve the firm’s reputation in the eyes of both clients and the US public, many of whom were the victims of the housing crash.

Mr Blankfein will have to tread carefully if he suggests that Goldman is the object of a politically motivated campaign, without further infuriating regulators, according to people familiar with Goldman’s likely defence. “It is always an unequal battle with the government,” said one lawyer. “They have a bazooka and you have a water pistol.”

 Fire up the bazookas, Goldman Sachs execs and their attorneys will be hauled before the Investigations Committee Tuesday to see if enough outrage can be generated against the Wall Street giant for hedging their bets school bus drivers might default on their $800,000 mortgages.  The Senate Committee will pour through all the Goldman emails to see if they can dig up some dirty laundry.   Maybe there will be Coke cans with suspicious looking hairs on them.  Al Franken can impersonate a Senator - oh wait - nevermind.

At the end of the day all we are likely to find here is that Goldman bet against a bubble we all knew had to pop.  All this will serve politicians who created the policies to fuel the bubble nicely.  In a year when Democrats must face an angry underemployed electorate, Democrats need to appear to be doing something.  They surely can't spend that time looking at their own failures, that would be too much to hope for.  Their solution is to have a bazooka aimed at a bogeyman.  At least this bogeyman appears poised to fire back, even  if it's only with their water pistols.