Why are people selling Goldman today? I’m not a trader and I would caution against taking any big positions based on policy that still lacks details. But it seems to me at first glance that Goldman and Morgan Stanley could end up benefiting in some ways from the Obama crackdown on the banks.
Goldman and Morgan can simply give up their bank charters and go back to being non-bank financial firms. Yes, they would still be subject to tougher prudential standards under the administration’s wider reg reform plan. Yes, they would lose access to central bank loans.
But denying them access to emergency liquidity in a future crisis is not credible following the experience of the last two years. They will continue to enjoy low cost capital because creditors believe they are too interconnected to fail.
Meanwhile Goldman and Morgan Stanley stand to benefit greatly from diminished competition if JP Morgan, Citigroup and other universal banks with big balance sheets are forced out of prop trading and aspects of the hedge fund and private equity business.
Isn’t a more monoline investment banking world is good for GS and MS?
Analysts out there: I’m a macro guy, I may have got this wrong. Please explain by way of a comment below!
