Here we are once again, on the eve of another record earnings report by Goldman Sachs. Are we back to the old days, or on to something new and different?
We can safely agree that the banking crisis is officially over, as this writer and others have recently argued. Whatever we may draw from the Treasury Department and Federal Reserve's methods, they've worked. Confidence is restored, at least enough to allow market-savvy traders to place the kind of aggressive bets that can reap windfalls for bank profits.
What's in store long-term is still a matter for debate, and as financial market regulation nears, no one's holding back on opinion. We just hope to measure the solution in more accountable transparency and more transparent accountability, and an opportunity for a more competitive marketplace in information and capital.
Different tomorrow will be the degree to which Goldman separates itself from the pack. Whatever huge numbers it posts, no competitor – what's left of them – is likely to come close. In the old days, Lehman would lead off with the usual better-than-expected earnings report. Goldman came next, then Bear, Morgan and finally Merrill Lynch. The language was always the same: "We've done a good job in managing risk", or "Our results once again demonstrate the diversity and financial strength of our group".
This go-around, of the big five, just Goldman and Morgan will report – and this time not as investment banks, but as bank holding companies. No one believes that Morgan will come anywhere close to Goldman, certainly not as it may have in the past.
But a new and completely different risk factor overhangs Goldman's once and future success: public opinion. The perpetual leader, Goldman appears to have navigated the crisis so brilliantly that it faces certain questions, many relating to the prowess of its trading operations.
If it's too good to be true, then it can't be. That's the difference between then and now. After Madoff, skepticism runs too deep for anyone achieving outlier success to wade through unchecked. The contrasting pain on imminent double-digit unemployment is too acute.
How far regulators and lawmakers ride this potential public inquisition will also reflect any shifts in the country's political leaning. We'll be able measure our tilt by how long these questions linger on the front pages of the popular press and in the blogosphere.
No doubt, Goldman's leaders will speak cautiously. Everyone knows its numbers will be stellar, so we don't suppose management would desire anything better. Best to be as matter-of-fact as possible.
Perhaps, though, public opinion will see its own success in Goldman's success: a vibrant green-shoot of Wall Street back from the dead.
Maybe opinion will make the connection between a healthy Wall Street and a healthy economy.
We hope that, however Goldman does it, other financial institutions won't necessarily see trading-led profits – betting with Other People's Money, in other words – as the sole route to success.
Diclosure: No Positions