Regulation is for the little guys: Is the Volcker rule affecting Goldman at all? 

One reason Big Government often helps Big Business is that Big Business can afford the lawyers to work itself around regulations. GE can afford 900 tax specialists to get around our high corporate tax rates. Mattel can hire up top congressional aides to get around strict toy inspection laws. And Goldman Sachs can afford Barney Frank's top staffer and Obama's White House Counsel, Greg Craig.

During the debate over Dodd-Frank, I wrote this:

Another pillar of Obama's financial reform is the "Volcker Rule," which would restrict the trading banks can do. Blankfein and Cohn, in their letter, indicate to shareholders that this rule will be no big deal for them.

The Volcker Rule would bar "proprietary trading" by Goldman (that is trading simply to benefit Goldman's bottom line) but would not restrict dealings "related to" serving the bank's clients. But even Goldman's most notorious financial dealings, transactions with failed insurance giant AIG, were client-related, Goldman told shareholders: "The net risk we were exposed to," Blankfein and Cohn wrote, "was consistent with our role as a market intermediary rather than a proprietary market participant."

In other words, almost any deal Goldman would make could be tied to a client, meaning the Volcker Rule couldn't touch Goldman, even if it cramps the style of smaller, less well-connected banks.

Today the L.A. Times reports this:

Goldman’s first-quarter results, released Tuesday, show that revenue from the firm's own investments rose 39% from the first quarter of 2010, which was before the Dodd-Frank overhaul was enacted. Those investments, which Goldman calls "principal transactions," accounted for $2.6 billion, or nearly one-fourth, of total revenue last quarter. They included private equity and hedge fund transactions entered into before Dodd-Frank was adopted.

Many analysts have assumed these sorts of transactions would be barred under the Volcker rule. But Goldman executives have recently told analysts that they believe they will be able to continue with this activity.

And keep this in mind: if Goldman is untouched or barely touched by this regulation, while its smaller competitors are hampered -- that makes the Volcker Rule a net gain for Goldman.

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Timothy P. Carney

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