When it comes to principal investments, the savviest bank by far has been Goldman Sachs (NYSE: GS). There was a day when you could count on one big principal transaction per quarter to boost earnings. The company had it down to a science. So is Goldman Sachs now the most vulnerable to the Volcker Rule?

In theory, the answer would be yes. TheStreet.com notes that Goldman has bout $30 billion in principal investments, much more than other banks. The Volcker Rule would need to limit principal investments to 3 percent of Tier 1 Capital. Goldman Sachs' Tier 1 capital stood at $65 billion at the end of 2009, so it would have to cut its principal investing from $29.1 billion to less than $2 billion. This of course assumes that the rule will ever really take effect.

As of now, there is a long lag time before compliance is actually required. It could be 12 years before it truly goes into effect. The industry's lobbyists do their best work behind the scenes, and one almost has to assume the rule will be watered down even more over the long haul, once the media eyes have moved on. But it does perhaps point to the need for Goldman Sachs to evaluate its business model regarding these sorts of investments. 

For more:
- here's the article

Related Articles:
Effects of regulation on hedge funds not onerous
Volcker Rule goes down to the wire
Goldman Sachs, Morgan Stanley to lose billions
Spin game: Reform to hurt JPMorgan or Goldman Sachs more?