Goldman Sachs’ definition of the Volcker Rule might be ballsier than the way other financial firms are interpreting the financial regulation.
According to a new analyst report, Goldman will be making a “meaningful investment” in China that others might consider in defiance of the Volcker Rule, which bans banks from investing their own money in hedge funds, private equity funds, or prop trading units.
Guy Moszkowski, an analyst for Bank of America, sent out the report today after he came back from meeting with Goldman execs in Asia, where they told him that the firm believes that it’s OK to buy stakes with its own money in some things, like companies. Others disagree –
“The market interpretation of Volcker rules is that this will be off-limits ahead, but GS believes that many such investments will remain permissible, and will be closing on a ‘meaningful’ one in China shortly,” Moszkowski’s note said.
Moskowski predicts that the acquisition will be a “a small, weak Chinese lender,” because Goldman “would be providing a service to the Chinese banking authorities by taking a problem off their hands, in exchange for which it would be able to take over an existing bank licence.”
And Bloomberg offers another bit fodder for Volcker conspiracy.
Although Goldman’s Principal Strategies and other prop trading teams have been dismantled, Bloomberg suspects that the Volcker-sensitive trading is taking place new group:
Goldman Sachs in January changed the way it reports financial results, creating a division called Investing and Lending. Investing and Lending contributed 19 per cent of Goldman Sachs’s 2010 revenue, making it the second-largest division on that basis after institutional client services, or sales and trading, according to Goldman Sachs’s annual 10-K filing.
Our take: It’s not just Goldman Sachs that wrote its own version of the Volcker Rule – every bank did, because they have to try to interpret it. We’ve heard bankers from JPMorgan, Morgan Stanley and probably more, say that their firms believe some investments are allowed through the Volcker Rule’s restrictions.