05/13/2010 04:25 pm ET | Updated May 25, 2011

Goldman Sachs -- It's About Bonuses

If you have pushed the revolving door at 85 Broad St at dawn enough times, Goldman Sachs just becomes a part of who you are.

As a professional who spent nearly a decade in the fixed income division at Goldman Sachs in both New York and London, it pains me to watch the firm get dragged through the mud on the news each evening by a cast of mainstream media characters more fit and incentivized to break stories about Heidi Montag's latest plastic surgery binge than the complex world of high finance. Add to this, a litany of senators and congressmen chiming in to the debate with the sole purpose of advancing their transparent political agendas and voila, the recipe for a public relations disaster that the recent SEC investigation has become for Goldman Sachs.

With this story well in progress, it is clear that the Goldman Sachs Business Principles that guide the firm have held true in that the stock price is down twenty percent on what amounts to be purely reputational speculation while the firm continues to post astonishing financial performance in 1Q10.

Excerpt from Goldman Sachs Business Principle, #2 of 14: "Our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore."

Attracting the spotlight is the antithesis of the corporate culture of Goldman Sachs, a firm that spends considerable time and effort keeping a low profile despite its dominance on Wall Street. Executives at the firm are acutely aware that its relative success makes it a giant target therefore the by-design strategy of flying below the radar.

The crime Goldman Sachs committed in the eyes of the public is having rewarded itself at the end of 2009 with fat bonuses after accepting TARP funds and federally subsidized low interest rate financing while the rest of the country bared the deep wounds of this brutal recession. If Lloyd Blankfein, the firm's Chairman and CEO, is guilty of anything it is for having vastly underestimated the scope of the public ire and combustibility over the bonus issue and the nation's desperation to assign a villain to the economic situation at large. The rest of the debate regarding the appropriateness of the origination and sale of the synthetic collateralized debt obligation (Abacus 2007-AC) is just a twisted and largely misinformed sideshow, a wildfire that mainstream media continues to blow hot dry air on for the sake of ratings. Certain politicians are no better.

Senator Byron Dorgan, Democrat of North Dakota, recently made the following statement in reference to Goldman Sachs: "To bet against your clients, to bet against your country, all for the sake of profit."

This statement is ignorant and dangerous if left uncontested.

The claim that Goldman Sachs somehow bet against the United States of America by crafting a synthetic C.D.O. for sophisticated institutional investors is baseless, ludicrous, downright slanderous and demonstrates Senator Dorgan's lack of understanding of modern day finance. Senator, please explain how constructing a derivative product (Abacus 2007-AC) for sophisticated institutional investors (John Paulson and ACA) to purchase in order to bet against the direction of the housing market became betting against your country?

With further reputation and significant market capitalization still at risk, it needs to be made clear that trades between institutional parties always have two willing participants and typically a broker in the middle who is incentivized to build and market the financial instrument. In the case of Abacus 2007-AC, Goldman was the builder and broker with documented input from the eventual counterparties. The other point that needs to be made strongly is that all parties to the trade were sophisticated institutional investors with tremendous access to information and their own obligation to perform due diligence outside the exhaustive disclosures made to them by Goldman Sachs.

So let's at least call this public relations disaster what it is, an issue over bonuses.