Goldman Sachs is unbeatable on its own playing field, even if all the other teams have gone home. But politics are another matter. The experts in Washington will win hands down.
This is not the first time a virtual monopoly has been challenged in the United States by democratic politicians. A hundred years ago a man named John D. Rockerfeller cornered the oil market with Standard Oil and after a battle his firm was split into seven parts.
Guilty by default
It is not clear yet whether Goldman Sachs will suffer more than a huge fine when it contests the subprime fraud case brought by the Securities and Exchange Commission. But democratic politicians can scent a popular cause a mile away and such sharks can and will draw blood.
Witness the bellows from the other side of the Atlantic from beleaguered UK Prime Minister Gordon Brown for an official inquiry into Goldman Sachs, or the noises emerging from Berlin keen to blame Goldman for helping Greece conceal its debt mountain.
This is pure politics. In democratic societies if you offend too many people for too long then you are in deep trouble. Somebody will come after you and the legal niceties will not save you.
Besides the general suspicion that Goldman has somehow conspired to rig the global financial markets to its advantage cannot be so far from the truth. Nobody wins so often and so consistently without fixing the match.
Is this a matter of trading on both sides of a trade? Or just having access to privileged client information that is used to advantage? Does this cross the legal boundary?
The important thing to note is that in politics this does not matter. Politics is about making the law and deciding what is right and wrong, and if you fall on the wrong side of this line there is no mercy.
What happened to the former wealthy classes of Europe whose money offended so many that the socialists taxed them into oblivion? Nobody said they were illegal or immoral, simply too rich.
And maybe that is what people really find offensive about Goldman Sachs. Its staff make too much money for doing something that seems of dubious social value. The feeling is that we are all being stitched up and it ought to stop.
Now President Obama taking his financial sector reforms to Washington is going to get a much better reception post-Goldman-SEC. Is that any coincidence? Sounds like good old democracy at work.
Disclosure: No positions