Next time there’s a financial meltdown, your money could be rescuing Goldman Sachs.
Yes, thanks to a new deal struck by Mark Carney, the former Goldman man now running the Bank of England, the US investment bank could end up enjoying the next round of British taxpayer bailout money.
During the last crisis, Goldman’s non-British status meant we would never have been on the hook, even if it had asked. Goldman could only rely on American taxpayers. And it did – getting billions of dollars via the bailout provided to financial giant AIG by Hank Paulson, the Goldman man then running the US Treasury.
But it emerged that the Bank has struck a deal whereby if Goldman is ever short of cash in its London trading operations, we taxpayers will offer it temporary liquidity to get it over the hump.
Some would smell a rat here, or maybe a giant vampire squid. A Goldman Sachs alumnus yet again offering special favours to Goldman Sachs?
But there is no rat. Rightly, the Bank wants to offer emergency liquidity to all big players in the City – not just Goldman Sachs – to prevent the market from seizing up if we get into another crisis. If all the international broker-dealers and counterparties regulated to trade in the UK are guaranteed good for the money, that’s positive for the market – and for Britain’s financial reputation.
What’s bad is the perception that, yet again, it is a Goldman man in the key decision-making position.
Bankers from Goldman are strewn across key policy-making arenas across the world like no other financial institution.
As well as the Governor of the Bank of England, his deputy Ben Broadbent is ex Goldman, as were two previous Monetary Policy Committee members, David Walton and Sushil Wadhwani.
Across the Channel, European Central Bank chief Mario Draghi is a Goldman man, while in the US, Goldmanites make up a quarter of the Federal Reserve system’s regional presidents.
It would be absurd to suggest we put a global ban on Goldman stars moving into public office, but we should find more diversity than we’ve currently got.
Perhaps Britain’s incoming commercial secretary to the Treasury, Jim O’Neill, could launch a review. Oh. Hang on…
