Goldman Sachs as the Object of Veneration on Wall Street

It is always instructive to read about Goldman Sachs's regulatory filings.  In spite of Goldman's constant lobbying against new rules and regulations, it always seems to be "complying:"  It sells its investments in hedge funds; it claims to be reining in risk under the Volcker Rule; it sets aside money for lawsuits ("the cost of doing business" rather than doing business ethically); it discloses arbitration claims from its underwriting (which is not always topnotch); and it even predicts what will happen if its credit rating fell. 

Yet, Goldman is what other banks aspire to as their ultimate object of veneration.  What a bank!

Goldman Moves to Comply With Volcker Rule
By Susanne Craig - DealBook

Goldman Sachs, moving to comply with a new rule aimed at reducing the riskiness of the country’s big banks, recently sold some of its investments in hedge funds.

The Wall Street firm disclosed in a regulatory filing on Thursday that it had sold $250 million worth of investments it had in hedge funds. Typically, Goldman will invest in hedge funds alongside its clients, but new regulations require the bank to reduce those holdings.

Banks have roughly two years to bring their businesses into line with the so-called Volcker Rule, which aims to rein in risk-taking on Wall Street by barring banks from placing bets with their own money. It will also will reduce the amount of capital they can investment in sometimes risky vehicles like hedge funds. Going forward, banks will be able to invest only about 3 percent of their capital in hedge funds.

“The firm currently plans to comply with the Volcker Rule by redeeming certain of its interests in hedge funds,” Goldman Sachs wrote in filing, which outlines its business activities for the three months that ended March 31.

The disclosure was part of a grab bag of information about the firm that included new disclosures about some of its legal battles as well as the number of trading days Goldman lost money on in the first quarter.

The bank said its “reasonably possible” losses from lawsuits in the quarter rose to $2.7 billion, up from $2.4 billion at the end of 2011. There was at least one new item of note in the disclosure.

Goldman disclosed that in February it was named as a respondent in three separate arbitration claims filed by the cities of Houston and Reno, Nev., and a California school district. Goldman said the claims were based on its role as underwriter and broker-dealer of the claimants’ issuances of roughly $1.7 billion of auction rate securities from 2004 to 2007.

The three entities say Goldman failed to disclose crucial information about their investments. The auction rate security market ran into trouble during the financial crisis, causing some investors to lose money. A number of people and institutions have filed claims against Wall Street firms over this issue. The cities and the California school district are seeking to recover damages.

Read the whole piece here