gs did not cause the financial crisis

I was following the nyt liveblog of the US Senate hearing on Goldman Sachs during the day. The bank is clearly on the defensive, and the senate committee members’ questions were smart and to the point. I’m thinking the headlines around the world tomorrow will focus on how GS was unrepentant and their statement that they didn’t cause the financial crisis.

My view of this is different from that of most people and, in this climate, probably considered politically incorrect and arrogant. No, GS didn’t cause the financial crisis. Nor Lehman or Bear or Citi or ML or AIG. Nobody could have predicted how bad and how long this crisis has lasted. The media portrays i-bankers as unethical and greedy. I’m not necessarily defending them, but there are certain aspects of the financial services industry that are unique. The pace and complexities. The unpredictability of the market. Comp structures.

Some of the comments in today’s hearing focused on how the bank sold derivatives that they were themselves short on. Um, that’s hedging. That’s how it works. Should those products have even been created in the first place? That’s the real question.