GS: Goldman Sacks today announced a $500 million initiative to help small businesses. I applaud them in this effort. A bigger question is “what is GS: Goldman Sachs? Are they an investment banking firm? Are they a primary government dealer? Are they a bank holding company? Do they take deposits from the public like a bank and then lend that money to businesses and consumers? How much of their own money or investors money goes to direct mortgage lending? Are they an insurance company providing insurance on risk? Are they now a lender to small business? What do you call a firm that sells an investment product and then bets on its failure or inability to pay?
“If it walks like a duck, quacks like a duck, looks like a duck, it must be a duck”
The government called them a bank holding company. The Bank Holding Company Act of 1956, the definition of a ‘bank holding company” is defined as “any company that has control over a bank”. What bank does GS: Goldman Sachs control?
Does a primary government bond have an advantage in trading bonds? The primary dealer system has been developed for the purpose of selecting trading counterparties for the Federal Reserve in its execution of market operations to carry out U.S. monetary policy. The designation of primary dealers has also involved the selection of firms for statistical reporting purposes in compiling data on activity in the U.S. Government securities market. These changes in the administration of these relationships have been developed after consultation with the Federal Reserve Board, the Federal Open Market Committee, the Treasury and the Securities and Exchange Commission
Bank deposits: The definition of a deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank’s books, and the resulting balance is recorded as a liability for the bank, and represents the amount owed by the bank to the customer. Some banks charge a fee for this service, while others may pay the customer interest on the funds deposited.
How about a mortgage broker? A mortgage broker acts as an intermediary who sells mortgage loans on behalf of individuals or businesses.
Insurance on CDO’s (collateralized debt obligations) we have seen the results of the risk AIG made on the sale of unregulated insurance products in CDO’s. You and I as tax payers had to pay off AIG’s bad risks on CDO’s with much of that money going to GS: Goldman Sachs. There are many people angry over the benefits that GS: Goldman Sachs received from the AIG bailout. What if AIG was right, would we have bailed out GS: Goldman Sachs?
What is a hedge fund? A hedge fund is an investment fund open to a limited range of investors that undertakes a wider range of investment and trading activities. The term “hedge fund” has also come to be applied to certain funds that do not hedge their investments, and in particular to funds using short selling and other “hedging” methods to increase rather than reduce risk, with the expectation of increasing the return on their investment.
Last quarter, GS: Goldman Sachs made about 85% of its earnings in trading and the rest in investment banking and other activities.
“If it walks like a duck, quacks like a duck, looks like a duck, it must be a duck”
From my view after reviewing the definitions of hedge funds, it seems like GS: Goldman Sachs is a Hedge Fund supported by the government and tax payers.
SCA provides independent research, contact mark@seleznovcapitaladvisors.com
Disclosure: There is no direct holding in GS: Goldman Sachs. The stock may be held long or short in broad or narrow index holdings.
