Goldman Sachs (NYSE:GS) is at it again. It's advising clients to bet against products that it peddled into the market itself.

Bloomberg reports that Goldman has been advising clients to purchase credit-default swaps on municipal bonds -- essentially a bet that the bonds will fall in price. Never shy about flip-flopping, Goldman has acted as "lead managing underwriter" in almost every state it advises betting against. Sound familiar?

It should
Goldman caught a fair amount of flak earlier this year, after reports that it made a $4 billion windfall shorting asset-backed securities … perhaps some of the same 100 some-odd billion dollars of mortgage-backed securities it had been selling to clients for princely fees during the boom years.

Sure, I see where Goldman's coming from: It's in the business of making money, not friends. Wall Street made some serious, serious blunders in recent years, but it still has the responsibility to advise its clients on appropriate investment opportunities, even if it was the one that created, packaged, and sold those opportunities.

To also be fair, it's ridiculous to say that Goldman caused the current scramble for survival that municipalities are facing. States, cities, and counties spent more money than most reasonable forecasts would justify, and they often relied on real estate taxes that anyone with an ounce of gray matter knew would eventually fall.

But that's not the point
What bugs me about Goldman's call to bet against municipal bonds is the affect it has on market psychology. The municipal-debt market is in shambles because investors -- perhaps rightfully so -- are scared out of their skivvies that municipals might be the next shoe to drop. Bring in the opinion of someone as credible and savvy as Goldman, and the negative perception in this market goes through the roof.

Any of this sound familiar? If I remember correctly, Goldman, along with other banks, such as Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM), were granted an extraordinary ruling back in September, when the SEC banned short-selling on financial stocks in an ad hoc attempt to quell market negativity … the same type of negativity that's destroying the municipal debt market.

In other words, Goldman is advising some of the same tactics that nearly destroyed the company itself just a few of months ago. I'll go out on a limb and say that's slightly hypocritical.

As fellow Fool Anand Chokkavelu joked, we're still waiting for news that Goldman files for bankruptcy protection, yet its traders score a massive windfall after shorting its own stock. Crazier things have happened.

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