In a powerful sign of tough times for the casino business, Wall Street powerhouse Goldman Sachs is actually going to use their bank charter to do what banks do – expand loans. According to the Wall Street Journal Goldman is planning to substantially increase their lending arm:
“Goldman Sachs Group Inc. 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 …”
There was a time when banking was a relatively simple business, but what these companies have morphed into has made the business infinitely more complex and an increasing risk to the financial system. I’m certainly not against private banking, but I am skeptical of this idea that it’s good for the health of our banking system (really our payments system) to be so directly tied to these companies who now derive so much of their income from gambling related business streams. Of course, I don’t have an issue with gambling (I love a trip to Vegas as much as the next guy), but when we’re threatening the stability of the entire payments system just so these companies can expand the bottom line and increase shareholder value then you have to start wondering if something isn’t wrong with the system. I won’t say that this move by Goldman is a sign that we’re moving in the right direction, but one can hope….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.