Just when you thought the name of Goldman Sachs could be subjected to no further opprobrium came the news of a secret deal between the bank and Her Majesty’s Revenue and Customs. This settlement followed a lengthy and complex dispute over national insurance contributions that featured a scheme involving Goldman Sachs Services, an associated company in the British Virgin Islands. Yawn yawn, you might think.
Way back in 2005, other banks that had attempted a similar dodge put up the white flag and settled with the UK revenue. Goldman, however, fought on. In 2010, David Williams, a tribunal judge, said the BV Islands company was “a way of keeping information about the GS accounts and payroll out of the public domain and confidential”.
HMRC then published minutes saying Goldman’s had incurred “no additional penalty for having resisted for five more years including…raking every conceivable point in the tribunal…and putting up a stooge witness”. Some kind of a sweetheart deal means they got off fines of £10 million. Now that kind of sum is chump change to Goldmans but it fought tooth and nail all the way to avoid paying it.
In the old days this kind of story would have been catnip to a few zealots at The Guardian and Private Eye but in the current banker-bashing climate everyone is interested. To the ordinary Joe on the street, this just looks like further examples of the dubious Leona Helmsley school of thought – namely that it’s only the little people who pay taxes. PAYE is for the mugs who cannot afford smart tax lawyers to get free of its strictures. To the hundreds of small business who feel the bruising heavy hand of HMRC and then are fined for minor accounting foul-ups, it is very anger-creating indeed. It looks like Goldmans, even when they are rumbled won’t play fair.
Goldman people are an odd lot – I cannot say I’ve met large numbers of them, as they are all far too busy making and counting their bonuses ever to leave the office. However, they don’t appear to mind as much as more thin-skinned mortals what other people say about them.
They appear to place little value on the broader public perception of their reputation. But after a lot of goading (and being called a blood-sucking vampire squid by a particularly splenetic Rolling Stone writer ), they came out and agreed to justify themselves in a long feature that appeared in the Sunday Times magazine last year.
I can’t say that they came over as an especially attractive lot – a lot of humourless 24/7 worship at the altar of Mammon – but they made their point: we do everything according to the rules and laws of the lands in which we operate, we’re the smartest guys in the room, and it was the dummies like those at RBS and HBOS that got you lot into your pitiful mess.
But during the course of this article their boss, Bronx-born Lloyd Blankfein, let slip the now infamous suggestion that they were doing “God’s work”. This was probably an ironic off-the-record quip, an aside to show he is human and has a sense of humour. But it went down like a lead balloon (not least with God himself, I should imagine). Goldman became incandescent with rage, and will probably never give a media interview ever again.
Now the outfit has just published its results and they don’t look quite so smart. It has announced a $428 million loss but is still building a $10 billion war chest to pay those necessary bonuses at the end of the year.
A while back Adair Turner, a wise and thoughtful individual with plenty of experience of the financial services sector, published some thoughts about where the industry should go next.
One of the points he made was that: “It is hard to distinguish between valuable financial innovation and non-valuable... I think that some of it is socially useless activity.” The relationship between money and social usefulness has occupied economists and philosophers for hundreds of years, but it's on all our minds at the moment. The new leader of the UK Labour party has brought it up in a slightly ham-fisted way by suggesting there are good and bad businesses.
Now we have all these protestors outside St Pauls and elsewhere around the globe who are very fed up not just with financiers but also capitalism. At least that is what some think they are cross about. I worry that if bankers were to be reduced to funding what is “socially useful”, that might lead to quite a few problems. Not least in defining what the phrase actually means. Even if what they do behind their Canary Wharf terminals has no more immediate social use than an hour's blackjack in a casino, the trickle-down effects of their huge tax contributions still pays for nurses and teachers.
When things were going well Goldman Sachs and all the rest trickled down quite a lot. But much of the extra revenue that was created during the boom years (and even after them) has been actively funnelled towards the most wealthy. However much they earn, it never seems to be enough.
Over in the US, the median wage paid to the slowly expiring blue-collar middle class has been stagnant for pretty much three decades. At the other end of the scale, however, the numbers have soared. Whereas in 1970 the average US chief executive made $25 for every dollar of their typical employee's salary, today the figure is more like $90. And investment bankers … well they made off into the stratosphere years back.
Business remains socially useful. Indeed, it’s the only way to grow us out of the current global economic mess. Those who go in to their businesses making goods and providing services every day trying hard and doing an honest day’s work should not be deterred. Banking, for many, is currently another matter.