Carl Levin's political witch hunt comes a cropper.
Happily, the episode already seems to be dying a deserved death, with Sen. Carl Levin, whose subcommittee investigation kicked off the furor, now backtracking from his suggestion that Mr. Blankfein be hauled up for perjury for testifying that Goldman "didn't have a massive short against the housing market."
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Mr. Levin had already referred his Blankfein perjury suspicions to every state and federal prosecutor in sight, who've obligingly launched investigations that now likely will be closed after a suitable face-saving interval for the senator.
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Unfortunately for melodrama, the tone of the subcommittee report conflicts with its actual details of how and why Goldman got shortin response to fears about the value of its huge "long" holdings of mortgage debt. Nor can the report quite disguise the fact that the size of Goldman's short, at any given point, was partly the product of accident.
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And pity the subcommittee's shmucks with Underwoods. They apparently were obliged to craft a narrative implying that Goldman fomented the housing crash in order to profit from it. Yet they had little to lean on except the hindsight fallacy. Example: Goldman dealt with multiple parties on various sides of the housing bet, but its short clients are characterized as "favored" clients while those on the long side are portrayed as victimsbefore anyone could possibly know whose bets would prove the profitable ones.
Ironically, the closest thing the subcommittee finds to a genuine violation also belies the devil theory of Goldman Sachs. Hold onto your hats: The firm is accused of trying (and failing) to drive up the price of mortgage debt because the market's pre-existing negativity was making it expensive for Goldman to get its own shorts in place.
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To be fair, intellectual honesty was always extraneous to Mr. Levin's purpose. If people with freckles or fanciers of schnauzers were suddenly to become popularly reviled, Mr. Levin would position himself as chief reviler. The politician's job is to be shamelessly, consistently wrong on every bubble, in favor of whatever is popular until it's no longer popular, against whatever is unpopular until the polarities reverse again.
