IRISH BUSINESSMAN Peter Sutherland has defended the track record of US banking giant Goldman Sachs as it faces potential break-up under radical reforms proposed by US president Barack Obama.
In an interview in today’s Irish Times, Mr Sutherland – chairman of Goldman Sachs International, the London subsidiary of the Wall Street investment bank – says Goldman Sachs would argue that it is “the exemplar in risk management” and that it covered itself sufficiently on high-risk investments that forced some giants out of business or into merger rescues.
“Goldman would say that it is precisely because they set up systems which avoided the culture that allowed it to come through unscathed,” says Mr Sutherland, one of a handful of Irish participants at the Davos economic summit this week. The bank has repaid $10 billion in aid it had to take under US toxic asset plan, Tarp. Its employees shared pay and bonuses of $16 billion for 2009 after reporting record profits of $13.4 billion last week, making it the most profitable bank on Wall Street.
The results were reported on the same day Mr Obama announced the most sweeping banking restrictions since the Great Depression, threatening to cut the size and risk-taking activities of the largest US banks.
Mr Sutherland declined to comment on the potential impact of the reforms on Goldman Sachs, but defended the bank’s decision to pay large bonuses. “It is for the boards of companies to discover and to decide how much of the profits of a company should be distributed,” he said, though he acknowledged that banks were taking steps to curb risk-taking by deferring bonuses over longer periods.
Mr Obama’s plan has divided opinion and dominated public discussions at Davos this week as top bankers have attacked the reforms in high-level private meetings with senior public officials.
Yesterday, in Davos, Mr Obama’s economic adviser Larry Summers criticised banks that had resisted regulation as they distributed large bonuses to executives. Mr Summers avoided saying whether the US plans would lead to a break-up of any of the major Wall Street banks, but said he believed the reforms would be introduced.
He criticised banks for opposing Mr Obama’s proposed tax, saying that they were insisting that paying big bonuses had no effect on their ability to lend but that the tax would.