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Lloyd Blankfein was on Bill Moyers show last night, he layed out what he thought was a good defense of GS, there was a fair amount of talk concerning the mortgage mess but not a lot of revelation regarding the nature of derivatives and CDO's, that the risks involved with such dubious financial instruments are obvious wasn't addressed.
Blankfein reiterated his views that GS was in a better position than his competitors, but he also stated his belief that all would have been up the creek without TARP funds. He never expressed any doubt about the fact that GS risk obligations were in the shape they were simply because they knew the government was going to provide the cushion, it was almost as though he thought government had a mandate to act on behalf of failed financial ventures. After some thought I realized that in the present day economic construct of statist capitalism the government does indeed have that mandate.
Te risk really was that thew others would satrt collpasing taking GSwith them in order. GS had already raised capital so itwasn't has bad. As long as companies want to aviod risk which can bankrupt them you wil always have these products.Without them a comapny could not risk many sales to deliever at futrue dates.Their big boys in the game and know what they are risking for the rewards.
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