No, I don’t think Ben is mad that Goldman (specifically) sold an instrument, just that these instruments (in aggregate) have served to thwart the Fed’s power to set target interest rates.
Greenspan started the “conundrum” talk back in 2004 or so as to how they weren’t seeing the expected interest rate changes in response to Fed policy. The Fed continued to see disparity in interest rate behavior clear into this credit melt-down, where as the Fed would be taking down target rates, the market was not reflecting the target, indicating that the Fed was no longer the 800lb gorilla in the bond market.
Every one of these new products in the debt market, especially derivatives, further thwarts the will and policy of the Fed. After all these decades of being the guys who call the tune, it is only natural that the Fed governors and chairs start getting a little PO’ed that they not only can no longer jawbone the market as they once did, they can’t really make the market do what they want through official policy, either.
The Fed, and the US taxpayer, has to get used to the idea that the Fed has essentially lost control of the US banking system. Only the most draconian regulatory framework being imposed could re-establish control, and indeed, the Fed and the SecTreas have now been talking up the plan whereby the Fed becomes the uber-regulator of the markets and banking system, perhaps having powers far in excess of the SEC.
I would prefer that the Fed quit socializing the losses of stupid actions in the financial markets and allow the invisible hand(s) of Adam Smith to deliver the requisite smack-downs, but in this current environment, it appears that Adam Smith is now dead and buried, and we’re going to have regulation - lots of it.
Ben is mad that the market outsmarted government? I didn't get that from this article.