For me this is a difficult story to track. Apparently, Goldman Sachs helps California sell bonds and then tries to sell municipal swaps that would pay face value of the bonds if California defaulted. That is neither illegal nor unethical providing a wall separates the parts of the company selling bonds and selling swaps. Moreover, the effect of swaps on bond prices and ultimately interest is indirect at best and it is difficult to determine whether it is positive or negative. In any event Goldman Sachs has been unsuccessful in making a market of municipal swaps, the treasurer of California isn't concerned but an expert is surprised that Goldman Sachs would do such a thing which on the surface is selling something then urging investors to "bet against it". There may be a smoking gun in here somewhere but I have a hard time finding it.