Goldman Sachs steps back from casino banking

The Vampire Squid launches a private bank for wealthy clients

Liz Rappaport, the Wall Street Journal:

Goldman Sachs is building an in-house bank to lend money to wealthy people and companies, in a significant shift that underlines the harsh business climate facing Wall Street since the financial crisis.

The New York securities firm, known for its aggressive trading and big corporate deal-making, is ramping up its activities to become a private bank to serve wealthy customers around the world. The new unit will also lend more directly to corporations, some of whom already make investments and do business with Goldman. Executives have set a goal of $100 billion in loans, up from $12 billion at the end of March.

Ever since the financial crisis, so-called "casino banking" has been a very unpopular area to be in. The actual practice itself was frequently condemened, for causing unsustainable booms in food and oil prices, as well as leading to the sort of attitude which caused the crash, where complex financial instruments were traded with little regard to fundamentals causing spiralling valuations which eventually got out of control.

But as well as casino banking being unpopular for what it is, it's unpopular for its relationship to regular banking. The idea is similar to that of "too big to fail", but the fear is that casino banks which also take consumer deposits are thus underwritten by the taxpayer, in the form of deposit insurance. It is for this reason that there are calls, in both Britain and the US, to split the former from the latter, or to allow banks to gamble, but not with customers' money. This latter requirement, the Volcker Rule, is what JP Morgan is suspected to have been bending in their disastrous "London Whale" trade.

Goldman Sachs' private bank is unlikely to fall on the retail side of any such divide, however. It's customers' deposits will be well in excess of the amount covered by insurance, so there will be little incentive for it to hamstring its activities. But its a long way to go to rehabilitate the Vampire Squid.

A vampire squid.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Tony Blair won't endorse the Labour leader - Jeremy Corbyn's fans are celebrating

The thrice-elected Prime Minister is no fan of the new Labour leader. 

Labour heavyweights usually support each other - at least in public. But the former Prime Minister Tony Blair couldn't bring himself to do so when asked on Sky News.

He dodged the question of whether the current Labour leader was the best person to lead the country, instead urging voters not to give Theresa May a "blank cheque". 

If this seems shocking, it's worth remembering that Corbyn refused to say whether he would pick "Trotskyism or Blairism" during the Labour leadership campaign. Corbyn was after all behind the Stop the War Coalition, which opposed Blair's decision to join the invasion of Iraq. 

For some Corbyn supporters, it seems that there couldn't be a greater boon than the thrice-elected PM witholding his endorsement in a critical general election. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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