BROWSE BY TOPIC
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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!