Goldman Sachs Chairman Lloyd Blankfein testified before the federal Financial Crisis Inquiry Commission yesterday. The following exchange is telling. (From Dana Millbank's column in today's Washington Post.)
"Would you look back on some of the financings as negligent or improper?" asked the commission chairman, former California state treasurer Phil Angelides.
"I think those were very typical behaviors in the context that we were in," Blankfein replied.
Angelides pointed out that others regarded Goldman's behavior -- in which the firm sold mortgage securities to customers and then placed bets against those same securities -- was "the most cynical" of practices. "It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars," observed the chairman.
Blankfein treated the chairman to a patronizing account of Goldman's function. "That's what a market is," the CEO explained.
Capitalism has proven to be the most effective economic system in history, when practiced reasonably. When pushed to its extreme, it may be the worst.