What is it about the name Goldman Sachs that makes otherwise sensible people foam at the mouth? Over the past few days it has become mandatory for any public figure to fulminate about Goldman’s announcement that it would be paying billions in bonuses to its 5,000 London-based employees. Alistair Darling declared that this was a grievous mistake and that no bank “would be standing here today if the taxpayer had not put their hand into their pocket”.

Lord Mandelson spoke darkly of an “unacceptable return” to past practices. Lord Myners, the minister responsible for the financial sector, lambasted people “being grossly over-rewarded for their contribution to the value added”. Even Boris Johnson, as London mayor the City’s stoutest defender, wrote that Goldman’s decision was “unbelievable ... what Asperger’s afflicts them?”.

At the risk of appearing like the man in Bateman’s cartoons who commits such social solecisms as to give everyone else in the room apoplexy, I beg to differ from all of the above. First of all, Mr Darling, it was not the taxpayer that “put their hand into their pocket” to bail out any banks — it was you who put your hand in our pockets. Second, no British taxpayer paid a penny towards mending the balance sheet of Goldman Sachs; that was a purely American exercise. Third, Goldman had been ordered by the US Treasury to take public funds — the firm had lined up refinancing from the world’s biggest private investor, Warren Buffett. And, fourth, Goldman rapidly repaid the US Treasury its money — at an annualised rate of more than 20%.

One of the elements that doubtless irks the British government is that by flooding the capital markets with money — via so-called quantitative easing — it has itself engineered the conditions in which so astute a trader as Goldman can make thumping profits. Yet it’s simply not the case that the London-based recipients of Goldman bonuses are scooping their millions off the back of British government largesse. Goldman Sachs, in common with many other US and multinational finance houses, bases all its European trading operations in London. No more than about 10% of those revenues flooding into the City stem from transactions involving British-based companies or concerns.

That’s right: this so-called casino is based in London, attracting players (bidding via the telephone or the internet) from all over the world. We simply pick up the vast croupier’s take. I say “we”, rather than just Goldman and its fellow traders, because their corporate profits are taxed here; most significant of all, so are their bonuses.

If Goldman does eventually pay out in 2009 bonuses to its London-based employees what it indicated last week, Chancellor Darling, as custodian of HM Revenue & Customs, stands to pick up £2 billion of it. That is £2 billion that he will not need to grab from the rest of us; and given this country’s catastrophic shortfall between tax revenues and public expenditure as the recession continues, you might think Mr Darling (and indeed Lords Mandelson and Myners) would be grateful.

Boris Johnson’s unfortunate description of Goldman as having some form of collective Asperger’s syndrome contains a germ of truth. If the firm were better tuned in to the sensitivities of others, it might have decided to retain more of its profits in its balance sheet, rather than distribute so much to its partners. What then would have been the effect on Darling’s balance sheet? Not so good: retained profits at Goldman (and, of course, at all other UK headquarters of international banks) are liable only to corporation tax at 28%; whereas bonus income for British employees will in future be taxed at 50%.

Then, if you have Keynesian leanings, which Darling certainly does, there is the “multiplier effect”: the building industry does extraordinarily well out of City bonuses. Many people may affect to find vulgar the incorporation of a subterranean heated swimming pool in a town house; but if you were one of a team of construction workers so employed, you would not worry about the owner’s taste in pseudo-Roman design.

Why is it that the Swiss municipalities are now holding cocktail parties in London, and persuading as many bankers and hedge fund directors as they can to attend? Like other financial centres, they covet the vast tax revenues and employment that London generates through being the world’s pre-eminent financial centre. What is the response of ministers? To insult the very people who are being showered with canapés by the Swiss.

The truth is that the British government knows the score. That is why, when the Germans and French tried at the recent G20 meeting to limit the size of bankers’ bonuses, Brown and Darling blocked the plan. They could see that it was nothing to do with the public interest, and everything to do with Franco-German jealousy of the City of London. This is what makes their posturing over the Goldman bonuses so transparently insincere. They know we know they don’t mean it. This is especially true of Lord Myners (who made a stonking fortune in the City himself).

Last week Myners expostulated: “We are simply not going to tolerate high levels of remuneration which are not justified and earned. The nation is angry and I’m angry.” Is anyone fooled by this mock tantrum? Myners went on to single out RBS for a warning. It’s true that the state holds a 70% stake in that benighted bank, so the government can do whatever it likes to RBS executive pay packages. Yet Lord Myners did nothing to block a £10m “incentive” for Stephen Hester — the new RBS chief executive — which would pay out simply if the RBS share price happened to reach 70p.

Labour’s empty bluster, an exercise in political futility that has the effect only of further fomenting public anger, is in sharp contrast to the action of Barack Obama, who proposed last week to cut by half the remuneration of the top 25 earners at US banks still in receipt of taxpayers’ funds.

That mendicant group of firms does not include Goldman Sachs — a great disappointment to those who see it as the evil genius of global financial manipulation. It is unusual nowadays to read a feature about Goldman that does not contain the phrase “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”. This was the description crafted by the Rolling Stone columnist Matt Taibbi, which has now become the accepted definition of the world’s most successful investment bank. Given Goldman Sachs’s Jewish origins, this is distastefully close to Hitler’s accusation (in Mein Kampf) of how Jewish financiers had “squeezed and sucked the blood again and again”. Both these phrases are direct echoes of the so-called blood libel against the Jews — that they drained the blood of Christian children to mix into their Passover matzos.

In the real world, Goldman is just a ferociously driven meritocracy. By way of example, its chairman, Lloyd Blankfein, was born and brought up in public housing, the son of a postman and a school dinner lady. There are similar stories of self-advancement throughout Goldman’s London workforce. Yet they would be more socially acceptable in this country if they pretended to have inherited their wealth, or better still, to have won it on the lottery: which is presumably why anyone who gains his millions playing Camelot’s game of pure chance pays no tax whatsoever.

There’s a message in all this, but it’s not one that does this country much credit. As a European banker preparing to abandon London for Geneva said last week: “I will miss your sense of humour but not your sneering attitude to success.”

dominic.lawson@sunday-times.co.uk

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