What Is Goldman's Horrible Crime?

Can someone please tell me what Goldman Sachs (GS - commentary - Cramer's Take) did wrong? I keep hearing that we should not be saving brokers that used too much leverage. Hmm, what are they supposed to do, not use leverage? How are they supposed to do their job?

That's nonsense.

They need to use leverage wisely. Lehman sure was stupid, a bad lender and run by an arrogant man who needs to be investigated for his frantic and wrong actions destroying his firm. Bear Stearns? Another wipeout. It's almost as if people don't understand that these people owned a lot of stock. They aren't moral hazards. We can't lapse into Leninist thinking, like if the rich are unhappy, it is their own fault. Both Bear and Lehman, and Merrill (MER - commentary - Cramer's Take) and Morgan Stanley (MS - commentary - Cramer's Take) for that matter, got into the mortgage origination business even though they knew nothing about it and were horrible and reckless at it. They generated monster losses.

Or how about the now-much-loved deposit institutions? Washington Mutual (WM - commentary - Cramer's Take) was a reckless lender and Wachovia (WB - commentary - Cramer's Take) almost as bad. Bank of America (BAC - commentary - Cramer's Take) and Wells Fargo (WFC - commentary - Cramer's Take) have a remarkable amount of bad loans -- auto, home equity, etc. etc. etc.

Now let's focus on Goldman Sachs. First, it never bought or created a mortgage origination arm. It has no home equity loans, no pick and pay, no teasers, no credit card (Capital One (COF - commentary - Cramer's Take) up huge today!) or auto loans. Too risky for Goldman, it could have gotten into all of these.

Second, it took some big hits in illiquid bonds, blew out of them, billions of dollars in losses, but it never reported a loss because of it has many businesses without a lot of risk that are doing great.

Third, because it has taken those hits and because it hedged appropriately -- does anyone remember that it was short mortgage bonds? -- this one has a clean book and yesterday it traded through its book. That's nuts. This is a bank in the end, and if it doesn't have the leverage or the bad loans -- and it doesn't have much at all -- how can that be bad?

A thriving economy is based on two components: confidence and credit. You can't lend without confidence and you need credit. We can't ban credit. How can Goldman be considered reckless? I just don't understand how this bank is considered reckless and deserving of failure because it was doing its job!

But that's where we are. Goldman probably will not go up until it merges with a crummy, reckless bank with a lot of bad loans.

I don't like the irony.

At the time of publication, Cramer was long Goldman Sachs and Morgan Stanley.

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