You know there’s something up with the plot when a Congressional Inquiry asks Goldman Sachs “Is your first loyalty to your clients?” and the answer that comes back is “Um…er…”.

It’s not as if the Goldman big cheeses said “No, it’s to our shareholders” – the usual kop-out when corporates are asked why they club together, after having clubbed clients, seals, and anyone else in the way of bonuses. The question seems, on the whole, to have taken them by surprise.

Losing to the SEC in court could seriously damage its reputation, but the obvious ownership of a moral compass that seems unable to stop whirling round like a utility meter in mid-winter could lead many to doubt whether the Goldman Sachs management are of this world at all, or in fact agents of Mephistopheles.

John Coffee, a law professor at Columbia University, told the FT, “This probably ratchets up the pressure on Goldman to settle”. Boy, does it ever. But Warren Buffett said Goldman shouldn’t be blamed for losses suffered by clients who invested in mortgage bets at the centre of the SEC’s fraud suit.

Mr Buffet’s reasoning on this one is hard to follow, but it could be the old Buffer’s ethics follow those of the accused bank. He told Bloomberg last Friday:

“I can’t see what difference it makes….it wasn’t so obvious when the investments were sold in 2007 that the housing market would collapse.”

Odd that Warren should reach such a conclusion, given that Goldman Sachs was betting on that very outcome with other clients. Even odder is the well-documented fact that Buffet opined on May 7th 2007:

But then, Mr Buffet does make $500 million a year in interest on his Goldman Sachs preferred stock. So perhaps he too has just a teensy conflict of interest.