Goldman Sachs Group Inc, which took US$10 billion in US bailout funds last year, shouldn’t get taxpayer support if the firm focuses on trading over banking, former Federal Reserve chairman Paul Volcker said.
The “safety net” provided by the US government “should not be extended beyond the core commercial-banking business,” Volcker, 82, said in an interview on Friday at Deutsche Bank AG’s Berlin office, where he was attending a conference.
“They can do trading and do anything they want, but then they shouldn’t have access to the safety net,” he said.
Goldman Sachs, the most profitable investment bank in Wall Street history, has reaped more than 90 percent of its pretax earnings this year from trading and so-called principal investments, which include market bets on securities and stakes in companies.
The other 10 percent came from advising clients on takeovers and capital-raising and from asset management, which includes managing hedge funds and buyout funds.
When the collapse of smaller rival Lehman Brothers Holdings Inc triggered a crisis of investor confidence last year, regulators allowed Goldman Sachs and Morgan Stanley, another competitor, to convert into bank holding companies. That put the New York-based firms under the Fed’s purview and gave them access to cheap funding.
The two firms received federal guarantees on new debt issues, as did commercial banks and some companies with financing businesses.
Goldman Sachs does “a lot of proprietary trading” and General Electric “does a lot of kind of complicated financial services,” said Volcker, an economic adviser to US President Barack Obama. “This is one of those kind of things that have to be sorted out.”
In a speech on Saturday in Berlin, Volcker said the financial crisis was still continuing and the US economy was “pretty dependent” on government support. The test for policymakers now is to time the exit from their emergency fiscal and monetary stimulus, he said.
“You’ve not got much room for exiting right now,” Volcker said. “The difficult thing is to be ready to take the action before it becomes obvious and that’s a challenge.”
Since January, Volcker has called for regulators to provide government support only to banks that provide essential services like deposit-taking and business payments. He has suggested prohibiting them from owning or sponsoring hedge funds, private-equity funds or from engaging in proprietary trading.
Goldman Sachs returned the US$10 billion it received from the US Treasury last year with interest. As of September, US$20.85 billion of the firm’s US$189.7 billion of unsecured long-term borrowing was guaranteed by the Federal Deposit Insurance Corp, a company filing said.
Lucas van Praag, a spokesman for Goldman Sachs, said the majority of the firm’s trading revenue comes from transactions with clients and not from proprietary trading, or bets with the firm’s own money.
“Proprietary trading accounted for less than 10 percent of revenues and earnings this year,” van Praag said. “Since 2003, proprietary trading has accounted for just 12 percent of net revenues.”
Goldman Sachs generated US$203 billion net revenue from 2003 through September, meaning that about US$24 billion was proprietary trading.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS