At the end of this year bailout recipient Goldman Sachs may award its highest level of bonuses ever.

This seems more than a touch surreal.

Goldmans' revenues are experiencing a surge benefiting from business driven by the crisis the firm helped bring about.

Firstly, the crisis wiped out some of their main competitors, so they can charge much more for their services.

Second, the crisis created a need for governments and corporations to raise substantial amounts of new money (eg, in the government's case, to bail out banks like Goldman Sachs). Goldman Sachs is a prime broker of government debt and one of the principal market intermediaries in all asset classes and is therefore benefiting from a cut on these transactions.

So, bonuses are back. Goldman's points out that now bonuses are held back for one year before payment, but the risky behavior they reward generally take a few years longer to translate into problems.

Better sit tight, or tackle your legislator to support effective regulation.

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"Too big to fail" has become an acronym and so part of the cultural lexicon. Can we at least stop it being a permanent feature of the economic system?

Scholars from the Brookings Institution argue that actually many supposedly TBTF institutions could in fact be allowed to fail without serious economic repercussions. What is needed is a commitment not to bail them out.

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The Center for Public Integrity has released a report on the $370 million spent on campaign donations and Washington lobbying by subprime lenders.

Most of the largest originators of subprime loans were owned or financed by (now) household names including Citigroup, Goldman Sachs, Wells Fargo, JPMorgan and Bank of America - yes, the same banks who have received the lion's share of the TARP bailout funds.

It is time to lock down rampant, destructive flows of money into politics.

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If a picture tells a thousand words, try these graphs prepared by the New York Times.

There are plenty of assumptions built into these figures, so examine them carefully. But the year-on-year first quarter figures are very telling. The only way I can think of that they might provide a misleadling impression of likely banker pay for the year is this: banks are moving towards lowering bonus components in exchange for awarding higher (twice or three times higher perhaps, but not bonus-level higher) basic salary. Depending on whether the banks had already implemented this policy at the time the first quarter figures were reported, the NYTimes estimates may over or underestimate the 2009 total pay level.

Its good indignance candy though.

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A New York Times investigation explores whether Tim Geithner's handling of failing banks might reflect overly close ties to the sector.

A detailed account. Worth reading.

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Perhaps for reasons of propriety, bank donations to politicians have fallen even as new regulatory constraints are being debated.

The Bloomberg article mentions Bank of America Corp. and Wells Fargo & Co in particular.

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Goldman's CEO Lloyd C. Blankfein said in a speech on Tuesday that compensation across the industry should discourage excessive risk-taking.

In the speech, given at the Council of Institutional Investors' annual spring conference, Blankfein outlined a set of guidelines by way of proposal to the financial sector.

Key proposals included assessing performance over time and allowing for a "clawback effect".

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Fascinating analysis by a former chief economist for the International Monetary Fund on how the financial sector grew large enough to dictate policy.

Simon Johnson, in his article in The Atlantic, compares the finance sector capture of government to the situation more usually found in emerging markets.

"Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world"

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Former New York Governor Eliot Spitzer gives his take in Slate on the "hidden conduit bailout".

"this raises two critical questions. The first is why did $12.9 billion of taxpayer money go from AIG to Goldman? What risk—systemic or otherwise—was being covered? If Goldman wasn't going to suffer severe losses, why are taxpayers paying them off at 100 cents on the dollar? As I wrote earlier in the week, the real AIG scandal is that the company's trading partners are getting fully paid rather than taking a haircut.

...

The second question, of course, is why was Goldman wise to AIG's declining position two years ago, but nobody else appears to have known.

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This issue cries out for immediate government inquiry. Maybe one or two of the more than two dozen government entities now beating their chests about bonuses can redirect their energies to this much larger issue confronting us: Who signed off on this $80 billion bailout—now approaching $200 billion—and why?"

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Leo Kolivakis's analysis over at the Pension Pulse blog helps us get beyond bonus fixation and on to the real financial scandals.

It is a long post but well worth the read. While the AIG bonus payments are deserving of attention, they risk stealing all attention from the pass-through payments totalling $183 billion made to financial institutions who in many cases had already been substantial bailout recipients.

Kolivakis then goes into the unfolding scandal of pension fund trustees and advisers being bribed to pile into "alternative investments", which he links to the bubble that has just exploded.

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