Bankers feel misunderstood

Anger at corporate excess has found its perfect target in Goldman Sachs, which last week delivered its biggest quarterly profit since it was founded in 1869. Photo / AP

It ought to have been a moment of triumph for Goldman Sachs, the most feared, revered and envied of Wall Street's investment banks. The firm last week delivered its biggest quarterly profit since it was established by German immigrant Marcus Goldman in 1869. But Goldman's bankers were unprepared for ferocious backlash.

Over the three months to June, Goldman clocked up US$3.44 billion ($5.24 billion) of profits - US$38 million a day or US$1.58 million an hour. Under Goldman's policy of dedicating half its revenue to staff pay, the firm's 29,400 employees can expect average take-home packages of between US$700,000 and US$900,000 for the year if the present level of prosperity continues.

Not everybody is impressed. The New York Times said Goldman employees were known in New York as the "bandits of Broad Street".

Right-wing television host Bill O'Reilly referred to Goldman as "swine". And Nobel Prize-winning economist Paul Krugman declared that what the bank does is "bad for America". "Goldman made profits by playing the rest of us for suckers," wrote Krugman, pointing out that the firm made a fortune in the run-up to the financial crisis by betting on a collapse in the sub-prime mortgage market.

Goldman's critics fall into two camps. Some believe such profits can only be made by taking irresponsible risks. Others, while welcoming its return to fiscal health, are disgusted that Goldman still insists on giving 49 per cent of its revenue to already well-off staff. Why, asked former New York Governor Eliot Spitzer, could Goldman not reinvest the proceeds in job-creating industries such as green energy or biotechnology?

Most galling of all is that, in the eyes of many, the money has been made with the help of the US Government. In the dying days of the Bush Administration, Goldman was one of nine top banks ordered by the US Treasury to accept bailout money whether they needed it or not. Within Goldman, there is disbelief at the avalanche of hatred. The bank points out that it pays a US tax rate of 31 per cent on its earnings - so the public get a third of its profits.

"The government and other banks want us to engage fully and provide liquidity into the markets," says a Goldman spokesman. "It seems perverse to criticise firms that have done what they're asked to do for doing what they've been asked to do."

As far as remuneration is concerned, Goldman does not consider itself a typical Wall Street employer. It recruits bright young people - and does not rely on Ivy League or Oxbridge graduates. On average, Goldman staff become partners by the age of 35 and are quietly encouraged to leave a decade later.

Many go into public office, further enraging critics, who view the succession of senior US government roles held by former Goldman staff as evidence of the bank's tentacles.

Goldman insiders feel that, perversely, the bank has been discriminated against by encouraging its staff to enter public service.

The bank is caught at the trickiest of moments: its earnings have recovered, but at a grassroots level much of Europe and the US remains in financial misery.

The fury and disbelief at Goldman's seemingly untouchable fortunes was captured by Elijah Cummings, a Democratic congressman for inner-city Baltimore. At a Congressional hearing on the financial crisis, he explained: "People in my district ... they say, 'Cummings, is that money that folks are getting on Wall Street, those millions and billions, is that our money? Because our money went somewhere.

"'What about us? What about us, who can't send our kids to college? What about us, who don't have a house?"'

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