A private hedge fund cannot "order" Goldman to construct and vend a security. In this case, John Paulson, a private HF manager, made a deal with Goldman to construct a packaged structure specifically so Paulson could bet against it. Goldman made money on the structuring, and I'm sure got a nice chunk of change from John Paulson. They then marketed the deal as if it was composed of worthwhile investments, even though they purposely structured it to be composed of investments that were expected to fail.
I have no problem with people making money in the markets by betting against the herd, but in this case the deal crossed a line into the territory marked "abject fraud."
This is the mortgage meltdown equivalent of Henry Blodgett giving buy ratings to Amazon stock at the same time he privately said the stock was a piece of excrement.
Remember what the purpose of the funds were: to buffer the risks of the loans being extended by trying to even out the risk level across all borrowers. This is normal hedge fund behavior and only necessary because of government action not hedge fund manager action).
I’m mostly incensed that the government has waited until now to issue these complaints (they would have been and were just as obvious in Sep 2008 as they are now).