Goldman Sachs as a private partnership?

There's been a whole lot of talk about Goldman Sachs (GS) and a possible move to reverse its historic initial public offering in 1999. The idea makes sense on a few general levels. If Sarbanes-Oxley prompted firms to go private, wouldn't the current regulatory climate, which is more onerous, more than justify such a move? But Sarbanes-Oxley was always used as something of a red herring by companies delisting. And similarly all the regulatory angst today doesn't quite make a going-private deal a foregone conclusion. 

There are several reasons why such a deal may not work. For one things, its PR blues would not end. In fact, they might actually intensify, as it would appear that the bank is merely trying to evade responsibility and oversight. For another things, their business model seems to rely on its public status, if only to keep financing costs low. The entire deal, even though the stock has swooned a bit, would be really expensive. And despite the furor over bonuses, I'm guessing that many employees are rather bullish on the firm's long-term prognosis. All those stock bonuses may pay off some day. 

But the idea has fascinated Wall Street. One investment pro told Reuters: "Goldman is already in the process of figuring out how to go private. Goldman did not need--or want the TARP money to start with--and there is no reason for them to keep their bank charter and remain a public company." Hedge fund manager Doug Kass, of Seabreeze Partners, told the news services he has made Goldman going private one of his "20 Surprises for 2010." This may be a bit over the top. But it points to the public fascination with the idea. 

At this point, I really can't see it. It would be more likely if the bank were to give up its commercial bank status, as a way to escape any Glass-Steagall-like separations of core businesses. But even that seems like a long shot. CFO David Viniar has said as much. So what will the bank do? My guess is that it will fight on regulatory terrain, stepping up its lobbying activity to head off any nightmarish scenarios. But it has to be thinking about all options. Going private would be the global nuclear solution. Giving up its bank charter would be a tactical nuclear solution. We'll just have to see how this plays out, but I think the bank would have to be war-gaming all options. - Jim

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