Goldman Sachs (GS) Turns Risk-Taking Traders Into Asset Managers To Sidestep Volcker Rule
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According to FOX Business Network's Charles Gasparino, Goldman Sachs Group Inc. (NYSE: GS) has figure out a loophole around the Volcker Rule and the restrictions that it places on trading.
The big Wall Street firm is turning some of its risk-taking traders into asset managers, and Gasparino has learned that the rest of the banks impacted by the new rule my soon do the same.
According to the report, Goldman has moved about half of its proprietary stock-trading operations, which were designed to use the firm's own capital to make market bets, to its asset management division. Under these conditions, these traders can speak with the bank's clients and then place market bets.
"The Volcker Rule is supposed to scale back on Wall Street risk taking by ending what's known as proprietary trading, where firms use their own ideas and capital to make market bets," Gasparino wrote. "But by having the traders work in asset management, where they will take market positions while dealing with clients, Goldman believes it can meet the rule's mandates, avoid large-scale layoffs and preserve some of the same risk taking that has earned it enormous profits, people close to the firm say."
Gasparino noted that the other big firms on Wall Street are watching closely the actions taken by Goldman.
"If these traders become more client focused they can survive," on senior executive at a major Wall Street bank told FOX Business.
Goldman is considered to have the largest proprietary trading business on Wall Street, with over 1,000 employees, while Bank of America (NYSE: BAC) is another big operation, having purchased the investment bank Merrill Lynch in 2008.
The big Wall Street firm is turning some of its risk-taking traders into asset managers, and Gasparino has learned that the rest of the banks impacted by the new rule my soon do the same.
According to the report, Goldman has moved about half of its proprietary stock-trading operations, which were designed to use the firm's own capital to make market bets, to its asset management division. Under these conditions, these traders can speak with the bank's clients and then place market bets.
"The Volcker Rule is supposed to scale back on Wall Street risk taking by ending what's known as proprietary trading, where firms use their own ideas and capital to make market bets," Gasparino wrote. "But by having the traders work in asset management, where they will take market positions while dealing with clients, Goldman believes it can meet the rule's mandates, avoid large-scale layoffs and preserve some of the same risk taking that has earned it enormous profits, people close to the firm say."
Gasparino noted that the other big firms on Wall Street are watching closely the actions taken by Goldman.
"If these traders become more client focused they can survive," on senior executive at a major Wall Street bank told FOX Business.
Goldman is considered to have the largest proprietary trading business on Wall Street, with over 1,000 employees, while Bank of America (NYSE: BAC) is another big operation, having purchased the investment bank Merrill Lynch in 2008.
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