Grin and bear it

Goldman Sachs: Only time, not public relations, will restore Goldman Sachs’ old aura. Its $500 million plan to support 10,000 US small businesses alongside Warren Buffett is praiseworthy. But some $17 billion in accrued pay for nine months of work and continuing rumblings of bailout favouritism risk making it look nothing but a PR gesture.

The firm headed by Lloyd Blankfein — who felt the need this week to express regret at Goldman’s participation in some of the credit boom’s excesses — used to attract respect and grudging admiration as it went about its lucrative business largely out of the public eye.

That’s all changed. Mainstream media and politicians alike have latched onto Goldman’s rapid return to megaprofits after one of the toughest years in memory. It set aside so far this year enough so that it's on track to pay every employee an average of some $700,000 for the year.

Goldman’s rebound owes much to government intervention. Aside from the general support handed to the financial sector, the US government was quick to help Goldman and Morgan Stanley directly at the height of the financial crisis by making them bank holding companies, a privilege that had not been extended to Bear Stearns or Lehman Brothers.

And along with other banks including Société Générale and Deutsche Bank, Goldman got paid out in full on certain American International Group transactions, raising eyebrows – although a recent report on that situation from the Troubled Asset Relief Programme’s special inspector general laid much of the blame on the government.

It doesn’t help the firm, memorably dubbed a “vampire squid” by Rolling Stone, that one architect of the financial sector bailout was then-Treasury Secretary Hank Paulson, Blankfein’s predecessor. Goldman alumni are in positions of power everywhere. Setting aside conspiracy theories, it’s not surprising that they would think alike – and in ways that tend to favour Wall Street.

All that said, Goldman was less irresponsible than most in the run-up to the crisis, as its minimal convalescence shows. Its partners have always made more money than rivals. The new small business initiative may not be enormous, but its details suggest it’s more complex and worthwhile than a simple PR move.

In any event, it’s unlikely the firm expects it to move the needle much on public perceptions. It may not be much fun, but the squid image will fade. Goldman just has to tough it out.