I've been wondering for several years how Goldman Sachs got to be so influential in Washington. Marcus Baram documented this at HuffPo in 2009: Goldman alumni are all over the capital, especially on the financial side. It's the money, of course; politicians love people with lots of money, because politicians need lots of money, all the time (which is another post, about campaign finance reform; but I digress). And there's the general assumption that if you have a lot of money, you must be really smart. You'd think the case of Bernie Madoff would alert people to the alternative explanation that, if you have a lot of money, you may actually be really crooked.
Goldman Sachs pissed off a lot of people during the bailout; here they are, the richest firm on Wall Street, and we the U.S. taxpayers, who are losing our jobs by the gross, have to come up with billions of dollars to bail out the banks so Goldman can keep paying its people multi-million dollar bonuses. They paid the money back to the government; but it's the principle of the thing. As far as I'm concerned, no man is worth the kind of money Goldman pays out in bonuses, I don't care if he's spinning straw into gold.
You've probably seen the latest development in this, but if not, here's a nice analysis from the Washington Post: "Goldman executives cheered housing market's decline." When the subprime mortgage security crash was taking down the economy, Goldman Sachs was betting both sides of the table. They were selling tottering CDOs based on subprime mortgages with one hand, and shorting the housing market (that is, betting that it would fall) with the other. The 9-year-old version of this is, "Heads I win, tails you lose." And Goldman won, really big. They're about to appear before the SEC, to discuss how closely they really did work with the hedge fund manager who was cherry picking mortgage pools he was sure would fail, so he could bet against them after Goldman sold them to their institutional customers - like, your pension fund.
Goldman Sachs used to be a private partnership. They went public in 1999, which allowed them to raise big money by selling shares in the stock market, without losing very much control over the firm. This also did two things for the men who ran the firm: it made them a barge-load of money, and it made them employees instead of partners. Partners are personally liable if a partnership fails. Employees just take the money and run. I wonder if any of the old-line Goldman partners are regretting that IPO now.
I worked in the financial industry (not for Goldman, ever) most of my professional life. It's a very strange world, and it's gotten much stranger over the last 20 years, as the lobbyists and the Republicans colluded to remove the restraints on financial firms that FDR put in, for damn good reasons, in the '30s. I want that financial regulatory bill to pass, but it isn't good enough. I want the Glass-Steagall Act back.