BROWSE BY TOPIC
Stories of Interest
- Canada's CIBC Completes $5Bn PrivateBancorp Buy
- Word ‘Women’ Literally Never Appears in U.S. Senate’s 142-Page Health-Care Bill
- Stephen Pierce, Goldman Sachs Global Head of Equity Markets, To Retire
- Al Gore 'Not Very Smart,’ But Became Filthy Rich Using Simple Investing Formula - Charlie Munger
- U.S. Regulators, Lawmakers Support Volcker Rule Revamp at Hearing
- Morgan Stanley Opts for Frankfurt as New EU Hub
- A New Risk for Goldman, Morgan Stanley in Stress Tests (subsc reqd)
- A Trump Bump for Law Firm of President’s Lawyer - Kasowitz Benson Torres
- JPMorgan, BofA, Goldman, Citi, Wells Fargo Pass Fed's Stress Test
- Blackstone Stock Still Trading at $31 - Its IPO Price From 10 Years Ago
- NJ Resident and NY-Based Global FX Club Charged with Solicitation Fraud, Misappropriation - CFTC
- Senate Republicans Release Plan to Replace Obamacare - The Details
- Berkshire Hathaway Throws $1.5Bn Lifeline to Canada's Home Capital
- Inside Nomura: Day in the Life of a Junior Banker
- Inside Travis Kalanick’s Resignation as Uber’s C.E.O.
- Creative Planning, KS Investment Firm, Spurring Change on Wall Street
- SEC Obtains Judgment Against Attorney Who Defrauded Escrow Clients
- SEC Files Fraud Charges Against Stock Promoters in Market Manipulation Scheme
- Power Lunches and Dinners in New York, London, Washington
- Banks to Cut $1.2Bn in Research Spending, Analyst Jobs - McKinsey
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Goldman Loses $1Bn on Deal Because of Volcker Rule – Waaah!
[Photo: by Kyle Flood / Wikimedia Commons]
The NYPost reports that Goldman Sachs, which had already made a $1 billion profit with its early stage investment in Israeli car tech company Mobileye, lost out on nearly doubling that gain because it had to sell off its 17.5% stake in the company to comply with the Volcker Rule. That rule, as we know, restricts banks from making certain investments with their own accounts, and limits their ownership of and relationship with hedge funds and private equity funds.
Now before breaking out in a chorus of tears, let’s have a look back at September 2008. That was when Goldman Sachs and Morgan Stanley - the last 2 major independent investment banks - opted to become bank holding companies. Which made sense, given that each investment bank was rumored to be on the merger block – earlier that year, we had seen Lehman Brothers succumb to bankruptcy, and had seen Bear Stearns and Merrill Lynch 'survive' only because they were gobbled up in 11th hour rescues.
According to the NYTimes Dealbook column, posted 9/21/08, Goldman and Morgan Stanley benefited enormously by their conversion to bank holding companies. Here were some of their incredible perks:
- Goldman and Morgan Stanley got some breathing room and reprieve from their financial constraints.
- Each now had a guardian angel - in the Federal Reserve - that would ensure that neither would fail.
- Each gained immediate access to the discount window of the Federal Reserve.
- Each had the opportunity to purchase ‘on the cheap’ banks that were failing left and right during the financial crisis.
So, in conclusion, Goldman Sachs did pretty well for itself, net-net over the past 9 years – notwithstanding this latest lost opportunity to ‘bank’ another $1 billion on Mobileye. We should all have such problems!