In the absence of that kind of fiduciary duty, what was wrong with Goldman deciding to sell some of its own exposure to subprime CDOs to its clients without disclosing the reason it was selling, or even if it was selling, or to bet against some of the same products that it was selling?

Committee chairman Carl Levin was one of many Senators who struggled with that concept, which rapidly became the central point of the wrangling between the bankers and the legislators. "You are betting against the same security you're out selling," Levin challenged Blankfein. “You don’t think the client would care?”

While some regulatory reform proposals, such as the so-called Volcker Rule, have involved banning banking institutions (as Goldman Sachs is today) from engaging in trading that is solely for its own account (or proprietary trading), many of the activities that senators found objectionable weren’t proprietary transactions, but rather were associated with Goldman’s role as one of the system’s most significant market makers.

Making markets—or meeting buy-and-sell orders placed by myriad clients—requires a firm like Goldman to take positions and sometimes to hold them on their own books. But if Goldman’s traders had to be sure that they were only selling investments that would have good outcomes for investors, Blankfein pointed out, “the markets wouldn’t work.” It’s up to these professional and sophisticated investors to do their own due diligence, he said, in what has become a frequently heard defense to allegations that Goldman is putting its own interests ahead of those of its clients.

Although some of the senators may have misunderstood—or not wished to listen to—some of the points made by Blankfein and the other current or former Goldman execs in their testimony, in seizing on the idea that Goldman Sachs had become its own single best client, they hit the nail squarely on the head.

In his letter to Goldman shareholders, contained in the firm’s annual report, Blankfein uses the word client no fewer than 47 times, and the word shareholder on only seven or eight occasions. And yet Goldman’s most important clients, ultimately, are the shareholders to whom the letter is sent.

It was in their interest that Goldman worked with John Paulson to structure the Abacus deal (whether or not the SEC proves its claim that Goldman stepped over the line and violated its obligation to disclose material information about the extent of that cooperation with Paulson’s firm). It was in the interest of boosting profits that Goldman engaged in the other transactions that came under fire in the hearing.

Now comes the hard part: finding a way to address the kind of conflicts of interest that both Democrat and Republican members of the committee appeared to feel are created by the kinds of transactions they laid out. It’s one thing for the senators to play to the peanut gallery by staging an 11-hour cross-examination of the Goldman Sachs bankers; quite another to take their criticisms of Goldman’s “me first” approach and figure out how to correct that via policymaking.

Levin seemed to have an idea of what would be a desirable outcome. If Goldman’s conduct had brought “into question the whole function of Wall Street” by enabling the investment bank to bet against its clients, then a logical goal should be to return to Wall Street’s function “as an engine of growth, betting on America's successes.”

If members of Congress can come up with a package of financial reforms that build on that objective and tackle head-on the issue of who is Goldman’s best client—and that of other Wall Street firms—then maybe they would end up with a bill that both sides could support unequivocally when it comes time to cast their votes.

If the senators put Goldman Sachs on notice that their actions weren’t politically acceptable, the bankers’ responses succeeded in putting the onus on the lawmakers to act to curtail what they find so objectionable.