How the Big Banks Rigged the Market

By Philip Stephens

When Lloyd Blankfein met politicians in London a little while ago he brushed aside warnings that investment banks faced higher taxes if they ignored the rising public outcry about multibillion-dollar bonus pools. The Goldman chief executive seemed to believe governments would not dare.

That misjudgment — a measure of the breathtaking hubris that, even after all that has happened, continues to separate bankers from just about everyone else — may explain Goldman’s response to the British government’s decision to apply a 50 per cent tax to this year’s payouts.

In the description of Whitehall insiders, Goldman executives reacted with anger and aggression. The threat was that the bank would scale back its business in London. For a moment it seemed Gordon Brown’s administration might wobble. In the event, Goldman’s lobbying failed to persuade it to soften the impact of the tax.

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