Goldman Sachs's (GS) Lloyd Blankfein is on the attack against the Securities and Exchange Commission. He's started a telephone campaign to assure clients that all is well in Goldman land. One client told the Financial Times that Blankfein said the SEC suit against Goldman would "hurt America."

Can you imagine how getting at the truth about what caused our financial meltdown is unpatriotic? That's a stretch if there ever was one.

Top Wall Street bankers testified before The Crisis Commission whose job it is to find out what went wrong during the financial meltdown. The Chairman of the ten member commission is Phil Angelides,

Mr Angelides grilled Lloyd Blankfein, CEO of Goldman Sachs GS about its practice of first selling sub prime mortgage securities to investors and then selling them short, betting that the securities would go down. Blankfein answered that Goldman did not have a legal obligation to disclose when it was betting against the securities it was selling. In reply, Angelides said: "Sounds a little bit to like selling a used car with faulty brakes and then buying insurance on the driver."

If anyone still hadn't fully digested the severity of the financial crisis, here's additional proof. And, if you thought financial firms just sat back and waited for government aide, you have been wrong. If anyone thought Goldman Sachs (NYSE: GS) was somehow unaffected by Lehman's bankruptcy, or wasn't trying to be proactive once it had happened, then the Financial Times over the weekend revealed just how much Goldman was affected. In fact, there was a lot going on -- and maybe still is -- leading up to the government bailout.

Goldman Sachs CEO Blankfein actually called Citigroup (NYSE: C)'s Pandit last month -- after Goldman changed status to commercial bank -- to discuss a merger. While it is reported that Pandit rejected the idea immediately, this kind of call underscores the severity of the crisis and all the secretive talks that never came to light, with and without the government's blessing, to try and resolve problems.

While Citigroup seemed more interested in Wachovia recently (losing out to Wells Fargo (NYSE: WFC), it may have wanted to consider Goldman's suggestion more seriously as the combined strengths would have been remarkable. With Citi's investment banking operation, it is, however, nearly unthinkable the amount of layoffs this merger would have caused -- much more than the current layoffs each firm is undertaking. And more shocking, it would have caused Goldman to lose its independence.

For now, such a merger is unnecessary given the Treasury's capital injection, not to mention Buffett's investment in Goldman. So far, Citi, though, hasn't seemed to move on any deals, or win the ones it does want.

Goldman Sachs (NYSE: GS) reported earnings today, and while revenue and profit were -- not surprisingly -- down from a year ago period (but higher compared to the previous quarter), it actually had profits to speak of, $2.09 billion of them to be exact. Indeed, Goldman did it again, surpassing Wall Street expectations for a profit of $3.42 per share on $8.74 billion of revenue with a profit of $4.58 per share and revenue of $9.42 billion.

It would be only natural to ask how Goldman made $2 billion while Lehman lost $2.8 billion. The answers are many, not the least of which is size: Goldman is the world's biggest securities firm, Lehman Brothers (NYSE: LEH) is the smallest among the four Wall Street investment banks. Other factors could include better hedging, financial decision making, diversification, management and strength of balance sheet.

To get a feel of the differences in numbers, Goldman currently holds about $14 billion of leveraged loans, down from $52 billion at their height less than a year ago in August. Residential mortgages, which include the subprime loans, have fallen to about $15 billion on Goldman's balance sheet from $19 billion last quarter. Lehman Brothers' portfolio of mortgages, including commercial loans, stood at $60.8 billion. It also has about $18 billion of leveraged-buyout loans. It is no wonder CEO Fuld took ten minutes at the beginning of the conference call to take responsibility.

Fortune, which shares a parent, Time Warner (NYSE: TWX), with BloggingStocks, has published a fascinating portrait of Goldman Sachs Group (NYSE: GS) CEO Lloyd Blankfein. The bald-pated Blankfein probably lost his hair before taking on the CEO job -- but Fortune portrays him as worried.

In my last book, Value Leadership, I wrote about seven principles that successful companies use to live their values. One of the most important of these is Fight Complacency. Blankfein's worries -- that Goldman will satisfy its envious competitors by failing to live up to its stellar reputation, that it will lose clients due to poor management of conflicts of interest, that it won't be able to grow profitably in 2008 and 2009 -- all center around his efforts to fight complacency.

Why is this important to Blankfein? His ability to boost Goldman's market position depends on making profitable bets. And Goldman can't keep making profitable bets without access to better information than its competitors have. With that superior information, and the skillful analysis of that information by a team of the smartest people, Goldman increases its odds of making more profitable trades.

This year Wall Street bonuses are looking to hit a new record. Last year, they hit a record of $21.5 billion and I've seen estimates that they'll be up between 10% and 25% in 2006.

One expert, Options Group, estimates that the big winners will be investment bankers and equity underwriters and traders. Driven by a record year in mergers, investment bankers will receive bonuses 20% to 25% higher than in 2005, as will those in equity derivatives sales. The "losers" will be fixed-income proprietary traders, who will earn the same or less than they did in 2005.

This year, the best place for bonus babies is the Goldman Sachs Group (NYSE:GS), which is distributing $16.5 billion worth of bonuses among its 36,000 employees -- up 40% from 2005. While this averages out to $623,418 per full-time employee, a few traders will take home $100 million.

How can any company justify paying so much money to one person? That $100 million bonus is 2,159 times the $46,326 that the median U.S. family earns every year! Do traders really work 2,159 times harder than the average family? Are their lives really 2,159 more stressful? How can any CEO justify paying out so much money?