Seeking Alpha

Goldman Sachs (GS) already has figured out a way to circumvent the Volcker Rule, Charlie...

Goldman Sachs (GS) already has figured out a way to circumvent the Volcker Rule, Charlie Gasparino says: turning its risk-taking traders into asset managers. Goldman has moved about half of its prop stock-trading operations into its asset management division, he says, where the traders can talk to clients and then place their market bets; the rest of Wall Street may soon follow.
Comments (16)
  • Bear Bait
    , contributor
    Comments (680) | Send Message
    Kinda why I was thinking' the financial regs were and are for the most part a great deal to do about nothing. When the people you are regulating are making you rich, it's tough to sit down on them very hard!
    27 Jul 2010, 06:22 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
    Is there really anybody that was not expecting them to find a way?
    27 Jul 2010, 06:52 PM Reply Like
  • tripleblack
    , contributor
    Comments (13553) | Send Message
    The more complex the regulation (2300 pages qualifies, in my book), the more fragile the finished product.


    FinReg will shatter at the slightest touch.


    Robust it is NOT.
    27 Jul 2010, 06:56 PM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
    as quick as new laws are conceived ways to circumvent them are as well, is anybody really surprised, the only way to stop this in the future is to make them all government employees, then all incentives to do anything outside the box will be gone, because the less you do the more more secure you are
    27 Jul 2010, 07:17 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9973) | Send Message
    as quick as new laws are conceived ways to circumvent them are as well
    Yep. Reminds one of the tax shelter schemes that Congress tries to close the loopholes on from time to time. Before they have even finished debating and trying to close a loophole, the lobbyists and financial engineers have 10 new ones ready to go for the next year. And they are already soliciting the IRS for pre-approval and lining up clients to start gathering funds for the next scheme.
    27 Jul 2010, 07:29 PM Reply Like
  • Ohrama
    , contributor
    Comments (518) | Send Message
    Perhaps many of you are not old enough to remember the break up of the old AT & T in 1984 (?) until which time we were strangled with monthly fees on obsolete equipments and so on, and the research labs operated like the universities (plus the added bonus of the monopolistic nature of the business) with not much incentive to move fast. The break up unleashed a wave of innovative products and lead to where we are now. We should do the same for these big banks / investment firms and make them fight for our dollars. But is it possible when we have the forced 401Ks etc. and these companies technically bribe (one way or another) to get those dollars quick in their hands (I recall my university would offer 3 or 4 vendors only for my 403B and nothing like a fixed CD in a local bank)? In fact, because of their power / influence, I am sure they get many of their ideas into legislation and keep themselves ready to grab the money even before it becomes available (I have witnessed the same at many research funding agencies. People with influence / connection get into the committees that define the future research direction and of course get themselves the advantage!).
    27 Jul 2010, 07:18 PM Reply Like
  • Duude
    , contributor
    Comments (3389) | Send Message
    The FinReg bill is 2300 pages of nothing. They designed this bill to make it a work in progress. Rules are still open-ended and not written in stone as the administration and Congress would have you believe. I believe this is more about setting up a system to maximize bank lobbying over the next 10 years. This is simply a gift to politicians reelection hopes. Not a work in progress but a corruption in progress.
    27 Jul 2010, 07:24 PM Reply Like
  • bob adamson
    , contributor
    Comments (4559) | Send Message
    Surely the Volcker Rule can not be circumvented simply by reorganizing the structure of an investment bank in question and renaming its risk-taking traders as asset managers in the Division of the bank in which they’re hidden away. Any regulation worth the paper it’s written upon will
    (a) define the nature and scope of activity to be segregated by the Volcker Rule,
    (b) define by the nature and scope of his or her activities the bank employees (whatever the job title or corporate structure applies to that employee) that constitute engaging in a segregated activity by those employees, and
    (c) spell out how those employees must conduct segregated activities in order that both the bank and all its employees comply with the nature and intent of the Volcker Rule.


    I am surprised by the defeatist attitude of several on the comments to this article.
    27 Jul 2010, 07:42 PM Reply Like
  • 7footMoose
    , contributor
    Comments (2266) | Send Message
    This story might have been interesting except for the source, Charlie , "I've never had anything positive to say", Gasparino.
    27 Jul 2010, 08:12 PM Reply Like
  • MarketGuy
    , contributor
    Comments (3983) | Send Message
    Yep, and show me ONE member of Congress who didn't already know they were going to do that.


    The revolving door continues to spin.
    27 Jul 2010, 09:33 PM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
    Of course they found a way around it.


    Just like the big banks have already started sucking larger fees from their poorest clients.


    Can't believe anyone is surprised, EVERY regulation coming out of Washington accomplishes two things: 1. The big corporations get bigger and drive more of their little competitors out of business and 2. those least able to afford increases in costs pay the most.


    Our political system has officially denigrated to everything our Founding Fathers warned us of. And, just as they predicted, most citizens don't understand and won't care until it lands squarely on their backs.
    27 Jul 2010, 09:56 PM Reply Like
  • Duude
    , contributor
    Comments (3389) | Send Message
    Regarding squeezing larger fees out of the poorest, I just heard bank of America is changing their one-time $30 stop payment into a stop payment for 6 months fee which has to be renewed every 6 months if you're uncomfortable after that. Its really pretty stupid of an idea since the solution is to close your account, but its a hassle.
    27 Jul 2010, 10:10 PM Reply Like
  • davidbdc
    , contributor
    Comments (3174) | Send Message
    How can anyone be surprised that Wall Street's best and brightest have already begun to run rings around government bureaucrats.


    I'm not really upset by this since Congress didn't really pass the Volker rule - which was clear cut and straight-forward. Rather they watered it down and cut special favors to almost everyone.


    We didn't address most of the problems. The only really good thing I can name from the bill is that derivatives will trade on exchanges. But you have to ask.... where are the capital requirements? Where are the restrictions on leverage? Where is the total reorganization of Fannie/Freddie? Where is the firing of 50% of the incompetent regulators from the past decade?


    For that matter, after they get done grilling BP executives for their incompetence, perhaps Congress should turn to two of its own and put Frank and Dodd on trial for their role in mandating that Fannie/Freddie make loans to those that couldn't pay them back.


    If we had really passed the Volker rule, GS would likely make a concerted effort to go back to being a partnership. Then partners would have their own capital on the line every day - we'd see huge advances in risk management practices!


    In terms of regulating Wall Street and big banks, we'd be better off firing the whole crowd that goes between lobbying, regulating, and working as risk management officers on Wall Street - its like a revolving door. Lets kick them all out of government and hire a bunch of recent graduates from Law Schools and business schools. They will be inexperienced, but they will also show up ready to actually follow through and do good - but only if they come into an environment that is devoid of the incompetence that is currently the norm at the SEC and our other regulators.


    And the thing no one wants to talk about...... in the S&L crisis more than 3000 people received jail sentences as we hunted down those responsible and charged them with crimes - like fraud. We have an AIG division that wrote more than a trillion dollars worth of insurance on CDO's with absolutely no assets to offset the risk.... thats called fraud. Its no different than you or I raising 10 million from investors promising conservative investments and going to Vegas and playing blackjack - of course, paying ourselves $2 million in salary.... and losing it all. We'd be thrown in jail for fraud. That is what took place on a grand scale - and we need to be hunting these folks down and giving them jail sentences. After the S&L crisis we haven't seen the same sort of bad behavior from small community type banks..... and I'd argue it isn't due to regulations but rather bankers saw their peers heading off to do hard time. Fuld and Mazzillo and Cassanno and the whole crowd need to be getting 25 and 40 and 15 and 7 year sentences for defrauding investors. When the jail cell slams shut on these guys that will do more to deter the next generation of Wall Street bankers than any regulations will ever do.


    Unfortunately our government seems to be so inept that they have thrown in the towel - either that or they are just so corrupt now that stealing a few trillion doesn't matter any more......
    27 Jul 2010, 10:52 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9973) | Send Message
    Right on. RICO law prosecutions. Consfiscate assets and jail. That is the ONLY thing that will deter these financial crooks. GS paying 1/2 billion in fines is peanuts to them. Losing all their assets and jail would mean something to them.


    It's no different than the Enron frauds of 2000. Merrill, and the investment banks paid fines and laughed all the way to their bonus payouts. None went to jail other than 2 Enron executives. Meanwhile we see Merrill and the investment banks right back up to similar things in 2008 again.


    And that is why SEC settlements mean nothing to the perps. Jail and asset consfiscatons under RICO laws are the ONLY thing that will deter these guys.
    28 Jul 2010, 12:05 AM Reply Like
  • gretel
    , contributor
    Comments (305) | Send Message
    So, we all know there is a Problem with GS and Co with there Congressmen and Senators in Tow . What can we DO ?
    28 Jul 2010, 12:04 AM Reply Like
  • jmf3210
    , contributor
    Comments (107) | Send Message
    Reuters is running an article today that indicates Citi is doing something similar to Gasparino's report on GS. Gasparino is quoted as saying GS traders 'talk to clients,' then go about their business. Seems a thin thread. Pretty cheeky, if you ask me.
    Is there nothing more substantive in the new arrangement? It seems more of a little head fake than an end run around the law.
    This Reuters article reports Citi actually uses the outside investor as front man (my term) , or collaborator, in the Citi proprietary take on it anyway.
    I quote from Reuters:


    "Traders in the Citi Principal Strategies unit could be shifted to Citi Capital Advisors, which manages money for outside investors, the news agency cited the people as saying.


    Citi would set up the traders as hedge fund managers and seed their funds, then raise money from outside investors to redeem its stakes, the agency said."


    28 Jul 2010, 03:02 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs