First, the good news:

Joe Nocera is back at the New York Times.

Now, the bad news:

Nocera’s Talking Business column, which has been on leave for what seems like forever, came back on Saturday with a bang headlined, “A Wall Street Invention That Let the Crisis Mutate.”

The topic: Subprime Mortgages.

The problem: Synthetic C.D.O.’s (collateralized debt obligations – don’t ask).

Here’s Nocera’s take:

At the peak there were well over $1 trillion in subprime and Alt-A mortgages that were securitized on Wall Street. That’s a lot, to be sure — but it was a finite number. You could have only as much exposure as there were bonds in existence.

The introduction of synthetic C.D.O.’s changed all that. Unlike a “normal” collateralized debt obligation, which contained the bonds themselves, the synthetic version contained credit-default swaps — derivatives that “referenced” a particular group of mortgage bonds. Once synthetic C.D.O.’s became popular, Wall Street no longer needed to feed the beast with new subprime loans. It could make an infinite number of bets on the bonds that already existed.

And why did synthetic C.D.O.’s become popular? One reason was that the subprime companies were starting to run out of risky borrowers to make bad loans to — and hitting a brick wall.

So they started air-trading, as it were.

And Goldman Sachs turned out to be the Guitar Hero of air-trading.

From Saturday’s New York Times:

Goldman Sachs, the Wall Street powerhouse, was accused of securities fraud in a civil lawsuit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly intended to fail.

Helpful graphic:

According to Saturday’s Wall Street Journal:

The complaint will fuel conspiracy theories that Goldman single-handedly created the crisis

Cue Matt Taibbi, a training-wheels Hunter S. Thompson who represents the gonzo wing of Wall Street reportage. Taibbi’s Rolling Stone piece about Goldman Sachs last year quickly became a classic.

Money quote:

“The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

For Taibbi’s latest ruminations, see here.

Whatever you think of Taibbi, it’s hard to deny that the current state of Wall Street Sachs.