Lloyd Blankfein and his accusers have at least one thing in common. Both talk convincingly, but fail to back this up with the concrete steps needed to bolster the financial system. In his congressional grilling yesterday, Mr Blankfein, Goldman's chief executive, admitted that “complexity and the fact that some instruments couldn't be easily bought or sold compounded the effects of the crisis”. He also called for more transparency, and supported clearing houses for “eligible derivatives”. These positions just about add up to accepting that the transaction involving a synthetic collateralised debt obligation that prompted a Securities and Exchange Commission lawsuit should probably not be allowed in the future.
But instead, Mr Blankfein went on merely to concede that he could see how such a complex transaction “must look to many people”, and suggested that Goldman must in future strike a better balance between what “informed” clients believe to be important and what the (presumably uninformed) public “believes is overly complex and risky”. In other words, Goldman merely needs to explain itself better.
Goldman needs to do more. So do politicians. Their repeated questions on Goldman's sensible attempts to manage their risk in the housing market tended to confirm Mr Blankfein's fear that legitimate but complex transactions could be misrepresented. Senators' unity in attacking Goldman was all the more distasteful in the light of their own pathetic failure, hours earlier, to make progress on a set of proposals to start the job of re-regulating the US financial system.