EDITOR'S TAKE: The Goldman case could do terrible things to pay

The headlines began a few days ago. The Sunday Times ran an article stating, 'Goldman set to pay 3.5bn of bonuses,' as if bonuses were paid in the first quarter and it were privy to information no one else knew about. The Guardian has got a similar piece today, except it's elevated Goldman's 'bonuses' to $5bn (tellingly reduced accidentally to $5m in the introduction).

For the purposes of public consumption, it's clear that however much Goldman says it's accrued in compensation in its first quarter results (to be announced at 12pm GMT), will be too much.

The Liberal Democrats appear to be successfully mining the public mood in the UK with their proposals to cap cash bonuses at 2.5k and prevent stock from vesting for five years. Goldman's potential accrual of 110k-150k per head for the first three months of 2010 will therefore be a red rag to the bull of public opinion.

Under normal circumstances, this wouldn't matter. But these are not normal circumstances: Goldman is facing charges from the SEC, which valid or not, are a severe risk to its reputation.

Now is therefore the time to be toeing the public line. Vikram Pandit did a good job of this yesterday, with obsequious references to the "huge debt of gratitude" Citi owes the US taxpayer.

Goldman needs to go a lot further. If it really wants to lance public ire and remove itself from the political spotlight, it also needs to pare compensation back to the bare minimum until the SEC case has been resolved. As former Goldman chief executive Jon Corzine noted recently, Goldman's success "brings envy," and its high levels of pay bring envy in particular.

However, if Goldman doesn't pay, the rest of the industry may not pay either. Without the spur of keeping up with the Goldmans, pay across banking could be recalibrated at a lower level. Citigroup seems to be hoping as much: its investment banking expenses fell last quarter, even as profitability in the unit soared.