Another reason Goldman is crying ‘regulate me!’ 

Liberal blogger Tim Fernholz at the American Prospect is following the financial regulation push pretty closely, and, like me, he listened to Goldman Sachs’s 1st Quarter conference call Tuesday morning. Fernholz noted:

The bank reported having 15 percent Global Tier 1 Capital — a relatively high amount of money for an investment bank to keep in the vaults.

Fernholz then reports that UBS banker sort of scolded Goldman for being so conservative. Fernholz than uses this scene to argue for regulation:

It’s just a little taste of the kind of pressure Wall Street firms are under to turn high profits and the pernicious incentives such a system creates, and why banks are so concerned about the potential that the Dodd bill will raise capital requirements and institute leverage limits.

One problem: Goldman isn’t “so concerned about the potential that the Dodd bill will raise capital requirements and institute leverage limits.” Goldman actually endorses federal rules requiring stricter capital requirements and leverage limits. From Goldman’s annual report: “we support measures that would require higher capital and liquidity levels.”

There are plenty of reasons Goldman would like these rules, and Fernholz actually points to one of them — Goldman is already playing it conservative. Rules that force banks to play conservative don’t hurt Goldman. Such rules do pinch smaller companies who might need to take more risk in order to compete.

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Timothy P. Carney

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