OBAMA/The following is a guest post by Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics. You can also follow him on twitter. The opinions expressed are his own.

As Congress was approving financial reform legislation yesterday, Goldman Sachs agreed to pay $550 million to the SEC to settle a civil lawsuit that claimed Goldman had misled investors in a subprime mortgage product as the housing market began to collapse three years ago. The settlement marks the beginning of the end of Goldman’s public humiliation for its relatively small part in the subprime debacle, but the firm still has a great deal of work to do to satisfy the conditions of its settlement, repair its relationship with clients and mend its damaged public reputation.

I have had a “neutral” rating on the forward operating results of GS since Q1 of this year and will leave that rating in place for two reasons. First, the carry trade reflected in record net interest margins in the banking industry is going to slowly diminish at GS and many other banks. Unless the Fed allows interest rates to rise soon, all of the assets of banks and funds will gradually re-price to near-zero. When the media waxes euphoric over the “trading” results of firms like GS, they fail to realize that much of trading revenue comes from simple interest rate spreads over funding.

Second, despite the settlement, GS remains in the midst of a mini-crisis in terms of brand and reputation. As Felix Salmon noted in a post on blog post back in June, Goldman CEO Lloyd Blankfein and his lieutenants are playing customer relationship management in order to retain clients. While JPMorgan Chase is playing offense, looking outside the U.S. for growth, GS is still very much in a defensive posture. Indeed, JPM’s bankers have been aggressively trying to take business away from GS for months.

For GS, everything depends on how the firm manages the process of addressing the remaining financial and political risks that have erupted over the past year. Blankfein has done a reasonably good job in steering GS through the political minefield, but the firm still faces a lot of private litigation as well as the more daunting task of winning back the trust of the blue chip corporate clients. Part of the requirement is simply time, but I believe that GS will eventually need to replace Blankfein and other members of the GS management team to truly put this crisis behind them — but not for the reason most people might think.