All Articles Finance Modern Money While You Were Working - August 22

While You Were Working – August 22

Goldman Sachs takes on the Volcker rule, banking disruptors, and the $1 trillion fund

4 min read

Modern Money

Lloyd Blankfein

Lloyd Blankfein and Goldman Sachs: Still making billions ... still tone deaf. (Jemal Countess/Getty Images)

FT lifted the veil on Goldman Sachs’ anti-Volcker lobbying efforts

The Financial Times does an excellent deep dive on the approach Goldman Sachs is taking to de-fang or outright eliminate the Volcker rule. While the piece is an excellent expose of some of Goldman’s tactics, there are three nuggets that caught my eye.

First is the notion that members of Congress, perhaps shy about proposing a bill that outright aids Goldman, might slip language weakening or eliminating Volcker into an end-of-year spending bill. I don’t think there is any “might” here. This is a lock. That approach worked for the swaps push-out rule in 2014. The only question is whether that member of Congress will have the courage to submit language that outright eliminates the Volcker rule, or merely neuters it.  

The FT also touches on an issue that highlights why – a full decade after the onset of the crisis – Goldman Sachs is still hated on Main Street.

“In 2007 the bank’s net trading revenue from bonds, currencies and commodities peaked at $16.2 billion. Last year, notwithstanding some reorganisation, the rough equivalent was $7.6 billion.”

Goldman Sachs’ profits from FICC were $7.6 billion last year … and all it can do is complain. That is why Main Street, populists, etc. hate Goldman Sachs. Full stop.

And finally, there was one rather humorous quote in the FT article from none other than Goldman Sachs Chairman and CEO Lloyd Blankfein. Blankfein has surely found his witty side on Twitter as of late, and this quote left me chuckling. In discussing the Volcker rule, Blankfein complained:

“You have people sitting on trading desks very nervous.”

Uhhh … is the trading desk at Goldman Sachs supposed to be some kind of Zen-like place where traders lounge all day in yoga pants listening to Enya? It is the trading desk of freaking Goldman Sachs! Those people are supposed to be nervous because they are taking risks. And some of those risks are yuuuuge risks. If Blankfein’s argument is that Volcker is stopping Goldman’s traders from taking big risks, then why are they nervous?

Disruptors set their sights on Brazil’s banks

At Pershing’s INSITE 2017 conference earlier this year, Oscar Salazar Gaitan relayed a story about his travels in Brazil. Gaitan was the founding CTO of Uber, so he was talking about disruption. He said he talked to some young people and one of them shared an insight about Brazil’s banking landscape. The young person said, “I need banking, but I don’t need a bank.”

Well, it looks like that young person isn’t the only person who thinks Brazil’s banking sector is ripe for disruption.

Tech titans a threat to banks?

Nowadays it seems like “Tech Titans” are a threat to just about everything: cable television, live sports, the fabric of humanity, etc.

I am not one who thinks Google is ever going to replace a bank like Wells Fargo for most of the things that banks do. The banks are too entrenched. I mean, think about how poor Wells Fargo is at doing “banking things” and it is still reaping massive profits.

No, I think it is the little nooks and crannies around the edges of banking that might be stolen away by tech disruptors. Things like payments and credit cards are attractive targets, but mortgages and car loans for the masses? I think those stay with the incumbents.

As for all those other industries? Look for Amazon or Google or Facebook to follow Twitter into the realm of NFL football. That will be a game-changer!

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