Goldman Sachs is "Doing God's work" according to this interview in The Times*. By this he means that GS is allocating capital in society, to the most productive uses, presumably.
I don't know exactly what is meant by this. Nature, and its wonders, is often thought to be God's work, by those religiously inclined. It is arguable that in fact evolution is God's work, or at least design, to save him too much work in designing lots of individual organs and organisms.
The problem, though, is that, actually, GS doesn't allocate much capital as such. Most of its revenue comes from trading, exploiting the bid-ask spread without taking significant positions, together with fees from traditional investment bank operations: mergers and acquisitions, together with IPO's.
Whether or not asset allocation is God's work, it should not be done by GS itself. The most it can do is produce good analysis and advice for the 'buy side': the principal investors. In fact that is not the way investment banks work. They are all income-driven, i.e. seeking to maximise the product of the average percentage fee (or bid-offer spread, expressed the same way) and total value of transactions.
To my mind, this explains why so much trading activity destroys value. The parable of the Gotrocks clan explains a lot. Buffett is always careful to avoid being too nasty to GS as they do act for him in some transactions, but it is clear to me that he regards them as fairly parasitic, if not exactly a giant vampire squid wrapped around the face of humanity.
The problem is that we, the population at large, are the Gotrocks, and we are losing out a lot to GS and their ilk. Unfortunately we rarely manage our savings directly (our pensions are almost always managed 'professionally') and we cannot choose to follow Buffett's example and avoid almost anything to do with trading.
I don't know how long the link to The Times article will work, as Rupert Murdoch has stated that he plans to charge for all content. A quick search should throw up the essential facts of the interview.
