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I watched the last 90 minutes of testimony of Goldman Sachs (GS) CEO Lloyd Blankfein before a Congressional panel led by Michigan senator, Carl Levin. All I can say is: What a joke!. Either Mr. Levin and his Congressional cohorts have such disdain for all things Wall Street and capitalist, or they are clueless and completely unqualified to sit on such a panel.

For three hours (according to reports - I only saw the last 90 minutes) the Congressional gadflies badgered, almost berated Mr. Blankfein for selling investments (bets) to clients while at the same time betting against those assets. Mr. Blankfein and Goldman Sachs were also bashed for betting against the U.S. housing market. Permit me to make a few points.

1) These so called "clients" were in fact other Wall Street professionals. Counterparties, such as Abacus buyer IKB (OTC:IKBDF) of Germany, were all too eager to go long the subprime market. They did so both before and after Abacus. Also, Goldman made the collateral available for all to see. Abacus buyers have a severe case of sour grapes. They may have relied on quantitative models and may not have looked closely at the collateral.

2) Goldman's job is to make markets. At most, Goldman was the middle man in this deal. It merely put buyer and seller together. It didn't even choose the collateral. Paulson and Co. did not make the final decision either. That responsibility fell to ACA, an INDEPENDENT deal structurer and considered one of the best in the business. Yes, Paulson wanted to have a say in what mortgages they wished to take a short position (who goes short or long securities or assets not of their choosing), but ACA has the right to kick out any collateral they deemed unsuitable. ACA did just that.

3) Lastly, Mr. Levin and his troop of jesters condemned Goldman for going short housing. Hello! Housing was over priced and lending standards were non-existent by 2007. Why wouldn't they want to go short? Let's look at some firms who were long housing, especially subprime during and following 2007: Lehman, Wamu, Merrill (MER) and Citi (C). There is a gallery of fools for you. Goldman was not in the brink of failure on its own, but rather was exposed to a failing system. It was those ostensibly virtuous firms who went long subprime which nearly brought down the global financial system. I guess it would have been better if Goldman had gone long subprime? Ridiculous.

There are legitimate questions which should be asked:

1) Should market participants be able to make naked bets (betting on securities or assets they do not own)?

2) Should such markets be so opaque as they currently are?

3) Should structures become so complicated that no one other than the astrophysicists (many of them are actual astrophysicists) who created these structures understand them?

I have an unabashed disdain for the use-- and even creation -- of synthetics, and the use of models alone in the trading of assets and the forecasting of markets and economies. There needs to be an in-depth understanding of market conditions, collateral specifics and how different structures react to different market conditions. Something my most recent employers and immediate supervisors haven't the slightest clue about. Bashing Wall Street trading houses for making money is like being angry with GE for making light bulbs.

This is an election year. Mr. Levin and crew obviously care more about votes than fixing what is wrong with the financial industry and mortgage markets (Freddie and Fannie).

Although I don't like synthetic structures and the arrogant attitudes of many of the self-important people who play in that market, I cannot see where Goldman Sachs committed fraud. In fact, we should be glad that it was Mr. Blankfein rather than Stanley O'Neal. Dick Fuld, Kerry Killinger or Chuck (keep on dancin') Prince running Goldman.

Disclosure: Long C, BAC, F, SIRI, FREprZ

Source: Goldman Sachs Debacle: Clueless in D.C.