So you remember the Timberwolf CDO, that scatalogical $GS deal Carl Levin made such a stink about back in April? Hilariously, Goldman is now being sued because of it, by a hedge fund that alleges that it collapsed because of it. Good times!

The lawyer, Eric Lewis, said Basis Yield Alpha Fund is suing Goldman to recoup the $56 million it lost on the now notorious Timberwolf collateralized debt obligation, which garnered a lot of attention during a recent congressional hearing.

The lawsuit, being filed on Wednesday in U.S. District Court for the Southern District of New York, also seeks $1 billion in punitive damages.

That’s right, one beeellion dollars. You know, time was, a guy would trick another guy into buying some crappy investment or another and the second guy goes bust, they’d just take it outside and settle it like men, with fisticuffs, then come back inside and reminisce over their fight with some beers. Now that happens and the second guy gets all lawsuit-y about it, requesting some zany made-up amount of money. I sure do miss the old days.

The suit alleges that Goldman pitched the Timberwolf deal to Basis even as the bank’s sales force and mortgage traders knew the market for CDOs could soon crumble. In June 2007, Basis paid $78 million for two pieces of the CDO with a face value of $100 million.

Basis, which financed the transaction with a loan from Goldman, said it lost more than $50 million when the bank began making margin calls on the product just weeks after selling the deal. Basis said the margin calls quickly forced it into insolvency.

Well, duh. Why else would an investment bank be so eager to get something off their books unless it’s a pile of crap? Look, Basis, here’s the thing: anyone who wants to sell you anything is looking to screw you, to some degree or another. In finance, this is a very high degree. They know how they’re going to screw you before they pick up the phone to call you. You know this. When they begin screwing you, you cannot act surprised by this. You can’t be all “Hey, I feel some weird pressure back there, what gives?” What you can do is take steps to hedge against potential losses. You are, after all (or were) a hedge fund. See, it’s right there in your name, unless you’re a landscaping company.

And Goldman…stop being dicks all the time. Seriously.

During the Senate subcommittee hearing in April, Goldman Chief Executive Lloyd Blankfein said the bank’s employees are often unaware of what strategies are being employed elsewhere at the firm.

“We have 35,000 people and thousands of traders making markets throughout our firm,” Blankfein said in response to a question from Senator Carl Levin. “They might have an idea. But they might not have an idea.”

But the Basis lawsuit raises new questions about the coordination between Goldman’s trading desks and its sales staff.

David Lehman, who joined Goldman in 2004 and worked as a managing director in Goldman’s mortgage trading operation, met with representatives of Basis to convince them that the prices Goldman was selling the Timberwolf deal at were fair and legitimate.

The lawsuit alleges that Goldman’s sales and trading desks worked together to sell the deal, which Goldman was taking a shorting position on.

Why would you even pretend that your sales and trading staffs (staves?) don’t work together? You would be morons if they did not. No, scratch that, you would be out of business if they did not. We’re not even sure why Goldman is even fighting this, it’s only a billion dollars. Goldman has made a billion dollars three times over in the time it took you to read this. If you lifted up the cushions on Lloyd’s office couch, you would find not only the billion dollars in loose change, but have enough left over to pay legal fees and court costs.