In Goldman Sachs We Trust?

[Orwellian_Ghost]

A Short Question For Senior Officials Of The New York Fed



At the height of the financial panic last fall Goldman Sachs became a bank holding company, which enabled it to borrow directly from the Federal Reserve. It also became subject to supervision by the Federal Reserve Board (with the NY Fed on point) – hence the brouhaha over Steven Friedman’s shareholdings.

Goldman is also currently engaged in private equity investments in nonfinancial firms around the world, as seen for example in its recent deal with Geely Automotive Holdings in China (People’s Daily; CNBC). US banks or bank holding companies would not generally be allowed to undertake such transactions - in fact, it is annoyed bankers who have asked me to take this up.

Would someone from the NY Fed kindly explain the precise nature of the waiver that has been granted to Goldman so that it can operate in this fashion? If this is temporary, is it envisaged that Goldman will cease being a bank holding company, or that it will divest itself shortly of activities not usually allowed (and with good reason) by banks? Or will all bank holding companies be allowed to expand on the same basis. (The relevant rules appear to be here in general and here specifically; do tell me what I am missing.)

Increasingly, the issue of “too big to regulate” in the public interest is being brought up – an issue that has historically attracted the interest of the Department of Justice’s Antitrust Division in sectors other than finance. Should Goldman Sachs now be placed in this category?

...

http://baselinescenario.com/2009/10/03/a-short-question-for-senior-officials-of-the-new-york-fed/

From the comments section:

I thought Matt Taibbi did a pretty good job of explaining this:

From Matt Taibbi’s “The Great American Bubble Machine” in Rolling Stone Issue 1082-83.

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

rest of the article at: http://www.rollingstone.com/politics/story/28816321/inside_the_great_american_bubble_machine

[truedelphi]

1. I know that Timmy the Elf has retired from his boring old NY Fed job, but

Could we ask him a couple of questions as well?

And his office is, for whatever reason, in the White House.

[Ruby the Liberal]

2. With the Gramm repeal of Glass-Steagall, they legally converted to

a retail bank via "bank holding company" status. Thats how.

[Orwellian_Ghost]

3. AM Bump