Stephen Foley: In defence of the giant vampire squid

US Outlook: It is with trepidation in the current climate that one writes in defence of Goldman Sachs, but the giant vampire squid has been unfairly maligned this week.

Despite breathless front page exposes, the promised investigations of the securities regulators and a subpoena from the publicity-hungry secretary of state in Massachusetts, William Galvin, I fail to understand what is wrong with the "trading huddles" that Goldman organises for its biggest clients.

These are the weekly meetings between Goldman's in-house traders, traders from its biggest hedge fund clients and the company's research analysts, where they bat around the analysts' ideas for short-term gambles on individual stocks or whole markets.

For the most part these are not trading ideas that are published to the rest of Goldman's clients, the smaller institutions and wealthy individuals who rely for advice on its network of brokers. These clients have to make do with the formal long-term research that is the analysts' stock-in-trade, and critics charge that, at the very least, this is unfair. The insinuation is worse than that: these huddles are a place, it is implied, where favoured hedge funds could get tipped off that a stock is about to be upgraded by one of Goldman's powerful analysts, something that often pushes the stock higher. The lucky hedge fund can buy in advance and sell to the hapless Goldman client who acts on the upgrade when it is finally published.

This isn't what happens. There's still enough sensitivity from the furore over tainted stock research during the dot.com era that Goldman makes sure its analysts are not contradicting published research, which in any case has a different time horizon. The Securities and Exchange Commission has begun looking for malfeasance; I may be wrong, but I would be surprised if they find anything.

Beyond the right not to be lied to, Goldman's minor clients don't have a right to every last jot and tittle of the firms' analysts' thoughts. You get what you pay for, and major clients pay fat commissions to Goldman when they trade on these recommendations. Analysts' ideas are a product that Goldman sells, not a public service announcement. Goldman is not the government's Office for National Statistics.

It has been open season on Wall Street's most profitable firm for most of this year, since long before a Rolling Stone article dubbed Goldman a "giant vampire squid wrapped around the face of humanity". There are major public policy issues to be debated about whether Goldman should be shrunk from its dangerously bloated size and about how regulators can curb its obscene profits and egregious bonuses. We will never tackle any of the important stuff if we get distracted by these trumped-up little conspiracy theories.