When Senator Levin says â€œGoldman made a lot of money by betting against the mortgage marketâ€ what do we think he might have meant? Knowing some of the political philosophy of the esteemed senator from Michigan, it is obvious that his inference was that Goldman was acting in a fashion that was either illegal or immoral. How could any American institution bet against motherhood, apple pie or the American dream of universal home ownership? And certainly the notion of â€making a lot of moneyâ€ is of dubious quality on its face. The Senator is literally screaming â€œThese people are the enemy of the state, and they need to be leashed, or chained, or imprisoned, or torturedâ€¦all for the good of the system of the people.â€
It is always amusing when a single statement contains such a large number of fallacies. Let us count the ways.
First, Goldman was acting in their role as an investment broker. Everything they do is essentially either a bet for or against somethingâ€¦or the facilitating of someone else doing the same thing. More technically, they are simply acting as brokers, and not as agents. Agents represent a buyer or seller. Brokers facilitate the transaction. This is the â€œmarket mechanismâ€ and it is what guides the whole system of the effective allocation of resources. It is fundamental to our material progress. As significantly, if people [...]