Now that financial reform has passed the Senate, Goldman Sachs and other Wall Street titans have to figure out what, if anything, they can legally do to retain some of their chief moneymaking businesses.
Goldman's principal strategies group -- one of the sexiest outfits on Wall Street, if Wall Street outfits turn you on -- now faces potential dissolution following the establishment of new rules that prohibit proprietary trading. The New York Times says, "Goldman is considering several options, including moving the traders to another division or shutting the unit altogether, according to people briefed on the matter."
That's a big deal. Year-to-date, Goldman has derived 78% of its revenue from its trading and principal investments division. Fortunately for Goldman, its competitors -- Morgan Stanley, Bank of America, JPMorgan Chase and Citigroup also face tough questions about what to do with some of their top units.
Lauren LaCapra at TheStreet.com reports that few experts can find legal loopholes to the reform bill, meaning that the banks need to take action. Still, since the laws are subject to SEC enforcement (and the SEC doesn't exactly inspire confidence), there may still be some room for hanky panky.
In the meantime, though, the enhanced regulations may engender a major staff exodus from top Wall Street firms, as banks like Goldman are forced to somehow make some of their most powerful units legal. Big-time traders are unlikely to take less-exciting and less remunerative work out of sheer loyalty to their parent companies.
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