There is nothing lovable about Goldman Sachs, and its recent grilling by the ominously named Senate Permanent Subcommittee on Investigations understandably drew a lot of attention.

We should not, however, obscure the reality. Goldman Sachs is a bank, and except for questions about the Abacus deal, in which it’s accused of disclosure failings, Goldman was doing what modern banks do. In collateralized debt obligations and credit default swaps, it wasn’t the biggest player.

So question for Congress isn’t whether Goldman did the right thing. The real question is, why on earth were banks allowed to do the things that Goldman was doing?

The late Hyman Minsky had something to say about this. In a paper from 1993, he was clear-eyed about the role of institutions like Goldman:

Essentially these operators have superior knowledge about their customers who need financing. . . and their customers who have a need for outlets in which money can be placed. They turn this private knowledge of the conditions under which funds are desired and the conditions under which funds are available to their own advantage, even as they perform the social function of selecting the investments that the economy makes.

Each of these financial intermediaries, Minsky well knew, “has an agenda of its own: they are not charitable institutions.” But they play a crucial role in the most sensitive aspect of capitalism, which is lending. And lending, Minsky said, is capitalism’s Achilles heel, a kind of fatal flaw whereby growth breeds instability.

In a brief paper called The Financial Instability Hypothesis, Minsky said that there are three kinds of borrowing: hedge, speculative and Ponzi. The hedge form was where borrowers could pay interest and principal from their earnings. But the speculative form was trouble; in this case, borrowers could cover the interest but not the principal. And the Ponzi form—in which it was necessary to borrow just to pay the interest—was downright toxic.

Minsky took an unconventional view of things, observing that what pushes an advanced capitalist economy toward disaster is not stagnation but a protracted bout with prosperity. In fact, Minsky said, the longer the good times last, the more prominent  speculative and Ponzi forms of finance become. In doing so, they make the system more and more fragile. No external shocks are required for a collapse—nothing more than, say, an effort by the central bank to rein in inflation is required to trigger massive asset sales by debtors who can’t service their debts. “A downward spiral is a possibility,” said Minsky, resulting in a depression.

Because prosperity breeds financial risk—with potentially catastrophic systemic consequences—it was important, in Minsky’s view, to regulate financial activities, such as the collateralized debt obligations and other derivatives that, while profitable for some, nearly resulted in a meltdown.

With a lot of help from Washington, Goldman survived the crisis, living to pay out ever-larger bonuses and remind everyone, in the most graphic terms, that it is not a charity. But perhaps its most useful function, now that it has become the poster child, is as a spur to the kind of tougher financial regulations essential for securing our future and maybe its own.