Should the People at Goldman Be Surprised?

It is now just dawning on the people inside of Goldman Sachs that they might be destroyed--not just humbled, but disappeared from the face of the earth.

The firm finds itself at the center of a coordinated campaign by the SEC, which must show its gumption (who better to show it against than the biggest Kahuna); the White House, which is using Goldman to push its financial reform bill (if you Google "Goldman Sachs SEC" you get an Obama ad--"Help Change Wall Street"); and the New York Times, which is the outlet of choice for leaks from the White House and the SEC involving Wall Street (Goldman found out about the SEC charges when the Times posted the story online).

As it happens, these are Goldman's friends--or were. Goldman has largely been the Democrats' firm, their brain trust as well as their bank. As for the New York Times, this is where Goldman leaks--not where it is leaked against.

Personally, I don't entirely get the SEC case--but that could be me. In order to bet against the housing bubble, Goldman, with the advice of a hedge fund guy who wanted to bet against the bubble, bundled a basket of mortgage securities. The theory was that since the market was so interconnected, the basket would reflect the market, which, it did--going down. True, John Paulson, the hedge fund guy, would have influenced Goldman to pick securities extra-likely to go down. So, perhaps less than 100% kosher.

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