Goldman Sachs: Regulations to hit hard?
So what is Goldman Sachs' biggest headache right now? According to Fox Business News, it's not the 50 to 75 pieces of hate mail that CEO Lloyd Blankfein sometimes receives in a single day. The lack of love from regulators is much more pressing problem.
A big question mark hanging over the bank is how regulatory changes will affect it. There has been talk that perhaps it would be well positioned to weather something akin to the Volcker Rule. It could simply give up its deposit taking business. But what if the new rules somehow call for more capital to be held against its trading activity?
The impact may be onerous. Goldman Sachs (NYSE: GS) apparently decided against a big stock buy back last year because the Feds warned against depleting firm's capital. We'll see if Mr. Market starts to factor this in. As for buying a retail bank, an idea that keeps coming up, Goldman Sachs PR guy Lucas Van Praag told the news station: "What would buying a retail bank really do for us? We could increase deposits in a heartbeat if we wanted to without buying a bank, but that wouldn't help us finance our core business. We're a wholesale firm that relies on funding from the capital markets and makes money from bid-offer spreads, not net interest income."
- here's the Fox Business News article