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Does Goldman Sachs really care about its rep?

(Money Watch) Goldman Sachs (GS) CEO Lloyd Blankfein reportedly says the investment bank has begun scanning internal emails for the word "muppet" and other signs that employees of the firm refer to clients in derogatory ways. The real question: Why is Blankfein bothering?

After all, other than further tarnishing Goldman in the eyes of a public that surveys show is already deeply suspicious of Wall Street, there is little evidence to suggest that the flap has hurt the company where it counts -- the bottom line. Goldman shares are up 6.5 percent this week and have regained whatever ground they lost since former executive directorGreg Smith penned a scathing March 14 op-ed in The New York Times in which he said that senior bank executives commonly refer to clients as "muppets." The bank's stock price is up more than 31 percent on the year, even as its earnings fall.

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To be sure, the furor over Smith's assertions is a nuisance for Goldman, and Blankfein at least gives the appearance of taking the charges seriously. The executive said on a conference call this week with Goldman partners that the company is following up on Smith's claims by reviewing employee emails, according to Reuters.

Left unclear is whether that probe is a sincere effort by Goldman to look after its clients or a public relations ploy aimed at deflecting criticism over Smith's charges. After initially rejecting accusations that big banks played a major role in the 2008 housing crash, Goldman and other Wall Street firms have periodically struck a humbler posture. When Goldman shareholders expressed concerns with Blankfein's leadership in 2010, for instance, he admitted the company need to engage in "rigorous self-examination." The following year, Goldman also issued a 63-page report listing dozens of ways it would improve its public disclosure and committing itself to "reputational excellence." The firm even reportedly considered having Blankfein appear on Oprhah Winfrey's popular TV talk-show in a bid to soften the company's image. 

Wall Street clearly isn't alone in mounting such campaigns. In 2006, for example, the last time gas was threatening to hit $5 a gallon, some oil companies dispatched their CEOs around the country to make the case that the industry's soaring profits were good for consumers.

For their part, at least some of the clients Goldman is said to have disparaged seem unperturbed. "Greg Smith doesn't change the way we view the firm," Mark Lasry, founder of the hedge fund Avenue Capital and a Goldman client, recently told CNBC. "In all our dealings with Goldman Sachs [we] found them ethical and proper." 

Goldman's reputation also appears largely intact within financial circles. A survey of 1,300 bankers conducted in 2010 -- even as the financial crisis raged and the firm's reputation was taking a beating -- found that it was the most admired bank in the industry.

For many Americans, of course, Smith's "muppet manifesto" only heightens their suspicion of Wall Street. But that view, however accurate, simply may not align with those of Goldman's primarily professional clientele and of shareholders. For them, being labeled a "muppet" may amount to the cost of doing business.