American Madness

Intelligent Criticism in the Service of a Better Nation




Goldman means never saying sorry

Posted by Lord Halifax | No Comments

Goldman Sachs sent out a press release to announce it came to its senses and exercised “restraint” with its 2009 bonus pool. The so-called commercial bank “limited” its $16.2 billion bonus pool to 35.8% of revenue, down from 48% in 2008. Excuse me while I reach for my airsick bag.

This fake mea culpa should in no way dampen enthusiasm for essential reforms supported by Paul Volker, the former Federal Reserve Chairman who was brought back to Washington D.C. from the hinterlands of a presidential economic advisory group, former Citigroup CEO John Reed and other highly regarded financial experts.

Goldman’s phony restraint does absolutely nothing to reverse the fact that it played a pivotal role in fueling the credit crisis by underwriting more than 7% of the industry’s toxic mortgage assets, pushing investments that it expected to fail on pensions, pocketing more than $12 billion of the AIG bailout and sucking up more than $20 billion of ultra-cheap loans funneled through the Federal Reserve discount window.
Congress can’t take its eye off the ball for a minute, or accept Goldman’s cheap public relations tactics as a sign that the firm has learned its lesson and can be counted on to behave. When the threat of meaningful regulation passes, Goldman will jack up its bonus pool to new heights.

Legislators must stay the course with proposals to eliminate conflicts of interest stemming from proprietary trading desks that operate inside global banks. These trading units have made fistfuls of money by betting against millions of the banks’ mortgage customers who are fighting to stay in their homes. We also need thorough derivatives regulation, an independent regulator to replace the Fed, an end to flash trading, strict mark-to-market enforcement and real guidelines for the use of leverage. The Basel capital requirement standards are also useless, as recent history has demonstrated.

Goldman employees will skimp by on an average $500,000 of bonus and compensation per employee, with much more for even slightly senior officials. Left unchecked, the firm will quickly get back to the business of making bubbles that line their pockets and leave the rest of us poorer. Saying “I’m sorry” doesn’t mean stealing billions of dollars from the public.

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