Please check out Matt Taibbi's "Taibblog": http://trueslant.com/matttaibbi . ... Especially the post captioned "The real price of Goldman's giganto-profits":
Wow. Matt makes his points passionately, which makes for great reading.
To his points I'll add a question - why are underwriting fees still (customarily) 7% of proceeds? (See Matt's numbered paragraph 5.)
Point of view #1: current monetary conditions and federal government support (read: bailouts) reduce greatly the risks involved in Goldman's bank* clients' recent equity capital raisings, including the usual underwriter's risks for which a portion of the underwriting fees are in effect insurance premia. (An example of a type of underwriter's risk is underwriter's liability under the Securities Act of 1933, as amended.)
Point of view #2: the underwriting compensation represents excess returns; that is, the compensation is more than should be expected to result -- in a competitive market -- based on the underwriting risks Goldman assumed, the talent and capital it brought to bear, and the time/opportunity cost involved.
*Bank holding companies, more accurately.