Sometimes the biggest ethics stories are the easiest. I haven’t written much about Enron, for example. When a company uses deceptive, shell corporations to hide its liabilities so profit reports look artificially rosy and investors keep buying company stock, it is obviously unethical. Even the ethics-challenged management of Enron could figure that out. The Goldman Sachs scandal, once one clears away the static and spin, is almost as straight-forward.

Are the Democrats seizing upon Goldman Sachs as a scapegoat for the financial meltdown they, like the Republicans, were complicit in as well? Obviously. That doesn’t mean that the firm doesn’t deserve all the abuse that is being heaped on it. Did the S.E.C., supposedly an apolitical and independent agency, time the announcement of its suit against Goldman Sachs to help rally public opinion behind the Obama Administration’s proposed Wall Street reforms? It wouldn’t surprise me. We have seen previous Justice Departments, the C.I.A., the F.B.I. and other supposedly “non-political” entities act blatantly partisan over and over again. The S.E.C. trying to give Obama’s reforms a boost would be one of the least dastardly of these breaches, especially since the public should be informed about the kind of conduct the culture of Wall Street permits. G.O.P. complaints about the timing of the announcement are, to say the least, strange. Would it be better to hide this story from the public? What matters is whether the S.E.C. has a legitimate case. It is clear that it has. It may not turn out to be a winning case, but it is legitimate. [Note: Personally, I think it is  more likely that the S.E.C. announced the law suit to counter the embarrassing revelation that so many of its regulators spent endless hours on the job surfing and downloading pornography off the internet.]

The legal issues will probably be settled in court; the topic now is ethics. After watching the testimony of various Goldman Sachs officials before the Senate, I find it hard to see a credible argument that what the firm did—selling what its own employees referred to as “crappy” investment products to firm clients, and then betting its own funds that those products would end up losers—could be called anything but unethical.

Goldman Sachs tried to describe itself in terms resembling a bookie, who just places bets, doesn’t recommend them, and is free to bet his own money on the same event as a client, even on the other side. This officials defending the firm’s conduct meant by describing its role in trading mortgage securities as that of a “market-maker,” rather than a financial advisor. But the analogy doesn’t hold. A bookie’s client has no reason to expect expert advice from the bookie, just a fair chance to win his bet. If the bookie secretly fixed a horse race, however, yet allowed a gambler to bet on the horse ridden by a jockey the bookie knew was going to intentionally lose, that would be similar to how Goldman Sachs  treated its clients that purchased mortgage securities. The firm designed the “crappy” securities, and sold them without divulging just how crappy they were. Only a crooked bookie does that.

“The way Wall Streeters see things, there is nothing wrong with this: How you bet with your own money and what you sell to your clients are unconnected,” writes Washington Post financial expert Sabastian Mallaby. “But non-Wall Streeters reasonably regard this compartmentalization as odd. Since Goldman had a clear view that the mortgage market was imploding, shouldn’t it have shared that view with its clients?”

Well, of course. Clients would expect that, especially if they read this passage from the Goldman Sachs website:

“A critical part of running the marathon is acting consistently and playing a fair and honest game. ‘There’s only one thing we sell, and that’s trust.’ This applies to anything, but nowhere more than Investment Management. Clients trust us to do the right thing, and particularly when you’re in investment management and you’re appointed to manage clients’ money, they trust that you’re going to do it in a prudent manner. The worst thing you could do is breach that trust. We look for people who want to run the marathon, and who understand that trust fuels it.”

In judging Goldman Sachs’ ethics, this statement is all we have to know. The firm told the world that it could be trusted, then knowingly sold trusting clients bad mortgage-based securities of its own invention, and made money betting against them.

Ethically, it’s an open and shut case.