The news that Bank of America-Merrill Lynch (BAC) and Standard & Poor's are warning investors about Goldman shares is not a dagger aimed at the heart of what is still a most profitable investment bank. After all, the civil case that the SEC has brought against Goldman is horribly complex and challenging to prove (the jury will be popping plenty of No-Doz). And the unsuccessful government case against Bear Stearns highlighted how high the bar rests for criminal cases.
But -- cue the howls of schadenfreude -- Goldman Sachs turns out to be a flawed organization, run by human beings who are not perfect. So who's howling?
1. Official Washington. The feds have long contended with Wall Streeters who wear their contempt for the government on their sleeve. (Remember how Jimmy Cayne, the former Bear Stearns CEO, impugned Tim Geithners's manhood? That's the norm.) Now, at least, they can be sure that Goldman understands this is not a game, something that was not entirely clear after its executives' performances before a congressional committee this week.
2. Goldman's competitors. You can hear them rehearsing the lines: "Sure, Goldman's a great i-bank, but is that where you want to go right now. Hire us now, wait to see how Goldman does."
3. Goldman's clients. They have had to watch the details of the SEC's case dribble out, adding to the impression that the investment bank's customers are little more that waystations on the path to profit. Hell, most of the executives at that congressional hearing wouldn't even say publicly that their job is to act in their clients' best interests. If I were Goldman's client, I wouldn't want it destroyed, only a little weaker -- that creates bargaining power.
Add to that list, in a very un-specific way, the general public.
Admittedly a hard one to measure, but Americans generally don't begrudge success, as long as they don't feel the playing field is tilted in favor of somebody else. Take one bank bailout, add mega-bonuses and a dash of legal trouble, and you get precisely that feeling.
If Goldman Sachs can't play fair, that's all the more reason to change the rules for big banks.
Image via Flickr user Serge Melki, CC 2.0