Members of principal trading groups and bank-owned alternative investment businesses have one less reason to fear Washington. If anyone still worried that the Obama administration might try to bar big institutions from proprietary trading even if the institutions gave up their bank charters, the White House's financial overhaul point man just laid such concerns to rest.
"The implications for Goldman Sachs or any other institution is, do you want to be a bank?" Paul Volcker told the Financial Times. "If you don't want to follow those rules, you want to go out and do a lot of proprietary stuff, fine, but don't do it with a banking license."
Since the White House unveiled its latest wide-ranging proposal to restructure the banking industry on Jan. 21 (often called the Volcker Rule), some in the industry have wondered whether its restrictions would extend to large non-bank institutions, or would apply only to firms subject to federal banking oversight because they accept retail deposits. Although administration officials gave mixed signals on that question, eventually a consensus emerged that the Volcker Rule's reach would be limited to institutions with bank charters. Volcker's comments appear to settle the matter once and for all.
Morgan Stanley and Goldman Sachs, while regulated as broker-dealers and subject to various laws covering stock and bond issuance and fund management, historically operated outside of banking regulation until late 2008 when the spiraling financial crisis spurred both firms to hurriedly seek and obtain bank charters. There is widespread speculation that Goldman is eager to reverse that move and resume its previous status as a non-bank financial institution.
Volcker: Choice Is Prop Trading or Bank Charter [Reuters]
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Goldman Sachs, Goldman Sachs, Clicking In the Votes? [The Guardian]
Proponents of a "Robin Hood tax" on securities transactions in London accuse Goldman Sachs of stuffing the electronic ballot box they'd set up to tabulate public support for their plan.
Economists Expect Shifting Work Force [WSJ]
Real Estate Maven Ross Eyes Banking [NY Post]