At the recent Senate hearings, Goldman Sachs' executives unanimously claimed that they had no obligation to operate in the best interest of their clients. As my lawyer friends say, this is a hollow caveat emptor nonstandard.

Growing up in an all-black community in Macon Georgia's segregated public housing with a single mother and nine siblings, we survived. We did so because, in general, we looked out for one another. The New Testament perspective that we held was, in effect, an informal fiduciary duty. It is a duty shared across the Main Streets of America. It is also a duty many community banks shared, before they were forced to compete with investment banks, and is shared by many religions from the teachings from the Quran to Buddha.

As a former mortgage broker, I was shocked to hear that Goldman CEO Lloyd Blankfein last year claimed he was "doing God's work." I was even more shocked by a statement Goldman's German leader, Alex Dibelius, proudly made to a group of impressionable German students that, consistent with Goldman's values, they "do not have an obligation to promote the public good".

Without the benefit (or perhaps burden) of a college education, much less an Ivy League, Goldman-type education, we would like to offer on behalf of black America and most of Main Street a few observations to President Obama and Congress before they enact their so-called banking reforms.

First, permit no financial institution to benefit from Federal Reserve policies such as close-to-zero interest rates, unless they adopt the following fiduciary standard: "No loan or investment will be made unless it would be suitable for my mother."

This is, in effect, the fiduciary standard we impose on lawyers representing clients from both Wall Street and Martin Luther King Boulevard. Beyond this fiduciary standard that prevents dealing the cards from the bottom of the deck, we would urge Congress to consider what Warren Buffett's senior partner, Charles Munger, said after learning of the SEC suit against Goldman: "The whole damn industry lost its moral moorings."

Our additional recommendations include:

  • Minimize federal benefits, such as cheap Federal Reserve funds and future mergers, for any financial institution with $500 billion in assets.
  • Maximize federal benefits, including possible new benefits, to any bank with $5 billion or less in assets that has an outstanding CRA record and permit any other financial institution with under $100 billion in assets to be eligible if it meets a special high community standard.
  • Limit FDIC-insured deposits to 5% of national deposits for any financial institution engaged in proprietary trading.
  • Consider either passage of the Volcker prohibition on proprietary trading and/or return to the FDR bank reforms known as the Glass-Steagall Act that separated commercial from investment banks.
  • Revise the federal tax system to impose a 50% surcharge on all individual bonuses above $500,000 a year for any institution that benefits from federal subsidy.
  • Require all banks to have a supplier development/diversity program for minority, women and service disabled-owned firms.

Hopefully, in the next few weeks Congress, with the guidance of leaders with a moral compass such as Paul Volcker and Rep. Barney Frank, will enact the types of reforms that will restore honor to the financial industry and enable all of us to rely on our banks almost as much as we do on our pastors or mothers.
In the interim, we urge Lloyd Blankfein not to resign. Instead, he should attempt to do God's work by tithing up to 10% of Goldman's earnings annually to underserved communities across the nation, just as Bill Gates is doing. In the long run this could be far more profitable for Goldman than risking SEC and Justice Department actions, since in the last two weeks alone the firm has lost more than $21 billion in market value. As Munger said, there is a difference between behaving legally and behaving ethically — and a business should not simply follow the former.

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