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How clever of Goldman Sachs to announce £3.5 billion worth of bonuses for its staff in the week that it was sued for fraud by the Securities and Exchange Commission. It is not hard to guess what will happen next. Politicians on both sides of the Atlantic will undergo another bout of frothing at the mouth over bonuses — and will continue to procrastinate over the real problem: that banks remain too big to fail.

Goldman Sachs’s profits and bonuses wouldn’t matter a fig if the US Government was prepared to let it go bust. But that won’t happen, because when it did with Lehman Brothers in 2008 it caused such havoc that governments effectively underwrote all banks. Goldman Sachs’s staff know full well that, however great the risks they take with...