Rein in Goldman

One problem with Goldman Sach's huge earnings is that it shows that they are taking too many risks. The various articles about it say that they continue to take huge risks, although they are clearly winning. The WSJ said that they had reduced their leverage, but they still made too much money to be trading conservatively. It illustrates the need for stronger regulation. Goldman can't control itself. Arguably its traders are smart enough to beat the market on a regular basis, but unfortunately for our financial security if Goldman can trade wildly, so can everyone else, which includes whoever will replace Lehman, Merrill Lynch, etc. Goldman is still doing what Wall Street firms were doing a year ago when they almost destroyed the global financial system. They shouldn't be allowed to continue to do that. Government has to cut back their margins, leverage, portfolio size, something, so that they are not too big to fail, and also not big enough to destroy the world.

Another problem, illustrated particularly well by Matt Taibbi in Rolling Stone, is that while playing the market has been good for Goldman, it has not been good for America. He says Goldman is responsible for many of the recent financial bubbles, including the oil bubble that ran gas over $4 per gallon last year.

An additional problem is the excessive compensation. It's not good to have such huge differences in wealth. It makes America look and act like a banana republic. The rich guys -- capital -- control everything, including the government, while the poor guys -- labor -- suffer for the mistakes of the rich guys, e.g., in almost destroying the global financial system. Maybe it should be okay for individuals to trade like Goldman does with their own money, but a bank should not be able to. That would somewhat limit the number of fantastically rich people. But also a more progressive income tax would cut down the gap. It looks to me like Reagan destroyed the wonderful America that existed for about 30 years after World War II when he significantly reduced taxes on the rich. Obama's election may show how uncomfortable a slight majority of Americans has become with this situation.