Fareed Zakaria writes in Newsweek: "We need to step back for a moment and try to understand what happened and learn the right lessons." What a good idea! This advice could apply to any subject on earth, but he is referring to the Goldman Sachs business.

Zakaria says that the transactions now so controversial were standard hedging exercises. Someone wants to bet against some security and the firm finds someone else who wants to bet in favor. The large German bank that took the bet in favor of the securities in this case "had whole departments" to size up such offerings. If they bet wrong, tough luck.

   
Furthermore, Zakaria says, it is wrong to say that Goldman "knew" that the housing market would collapse. A lot of people thought they knew it and lost money as a result by being right too soon.
   
This misses the point. Goldman knew something else the German bank didn't know. It knew that the mortgages being bundled into the security they were betting on had been hand-picked by the fellow who was betting against them. And he was picking them (naturally) with the intention of maximizing the chance of failure. Is this material information? Well, would this bank, or anyone else, have taken this deal if it had known these circumstances? The question answers itself.