My coffee was too hot
So GS gets their comeuppance from the SEC. Nobody should cry for GS if they are fined for their lies and misrepresentations. But what about their counterparties? They lost $1 billion because GS did not tell them that Paulson felt bearish about their CDOs? Excuse me, but these people were not some Norwegian fishermen. They were professional financiers who should have known how to analyze securities. So how exactly were they defrauded of their money? Because GS forgot to tell them that security prices can go in both directions? Give me a break.
There is a much simpler answer. They were deceived because they were only too happy to deceive themselves. Subprime CDOs looked to them like a good risk so they wanted to get the kind of advice from GS that would justify taking this risk. Sure enough, GS delivered exactly what the customers wanted.
It takes two to tango.