If money is an abstraction, the investment industry's creative inventions are abstractions of abstractions of abstractions. Banks no longer just give people loans to buy houses. Now Wall Street's geniuses -- and they are ingenious -- trade bizarre financial products in which the original loan is packaged with thousands of others and buried under piles of equations and economic gibberish.
Goldman may face SEC charges, but it's the entirety of our deregulated financial system that's on trial. In this new order, the inventiveness of our entrepreneurs goes not only into creating products that actually enhance our lives (from refrigerators to laptops to iPods) but also into fashioning "absolutely conceptual and highly theoretical" financial products whose main function is to enrich a very small number of well-placed people.
The ever-more-complex financial instruments are defended on the grounds that they make life better for everybody. Tourre offered this justification in another of his revealing e-mails: "Anyway, not feeling too guilty about this, the real purpose of my job is to make capital markets more efficient and ultimately provide the U.S. consumer with more efficient ways to leverage and finance himself, so there is a humble, noble and ethical reason for my job ;)"
Then he added: "amazing how good I am in convincing myself !!!"
Tourre's unconventionally punctuated observations go to the heart of the debate we need to have: How many of the arguments offered on behalf of these exotic transactions are nothing more than rationalizations for the capacity they give a few investment bankers to get very, very rich?
Does it make sense to have investment houses playing the role of "market makers" peddling financial junk with one hand that they then bet against with the other? Let's assume for the sake of argument that this is perfectly legal. The real question is: Why should it be?