Conclusion: It's the Sh*ts

Powerline aptly summarizes today's Goldman hearings: Demonizing Goldman Sachs

Today's inquisition was a sideshow. Here is what really happened: there was a bubble in housing prices. The bubble was mostly the result of government policy--loose money, combined with pressure on banks to make bad loans to unqualified home buyers. It all worked for a while because Fannie Mae and Freddy Mac, under the leadership of Congressman Barney Frank and others, created a secondary market for shaky mortgages. Goldman Sachs participated in this market, downstream, along with many other players. But the whole thing wasn't an accident or a conspiracy, it was government policy. The home price bubble could have only one possible result. All bubbles burst--there is nothing else they can do--and the bursting of a bubble is always painful. The whole disaster that began in 2008 was the inevitable result of government policy, which is why Senators are so anxious to pass the buck to Goldman Sachs.

What's funny is most people instinctively understand this and more, which only goes to underscore the farcical nature of these proceedings. While people are struggling with mortgages on houses that have declined in value, members of the US Senate (many of whom appear to be in their seventies) are grandstanding on television over some French kid's emails and their effect on the global economy.

Some thoughtful people have wondered whether the Crash of '08 has revealed dangerous flaws in the institutions of capitalist democracy. I don't know about the institutions themselves, but certainly the people inhabiting those institutions are hopelessly flawed and increasingly dangerous as they cast about desperately for a solution to a problem they don't understand.