Blankfein on Volcker Rule, OTC derivatives


Goldman Sachs CEO Lloyd Blankfein, fresh off only the company's second quarterly loss as a public company, told the audience at a recent Bank of America Merrill Lynch conference that a weaker economy and tougher regulation did not mark a secular shift in financial markets and that an upturn was brewing, according to the Financial Times.

That might strike some as wishful thinking, given the general revenue malaise that has settled upon the financial services industry. Blankfein also suggested that "Goldman's target of a 20 percent return on tangible common equity might be reduced but said that the bank's executives had not yet calculated a new target." In this area, "regulation will be very important," he said.

He went on to note that dealers would be able to withstand the new regulatory storm--which comprises the Volcker Rule and OTC derivatives clearing among many other planks--much better than corporate customers will be able to.

"It's not the dealers and it's not the investment bankers and providers that have to grapple with regulation," he was quoted. "It's users and consumers in the market that have to deal with different margin requirements...have to deal with unfortunately and inevitably higher cost in managing their portfolios...and have to pay the price for the higher cost of holding inventories."

Blankfein thinks that end users will push back hard to fight the Volcker Rule and other reform pieces. To an extent, he might be right. Fierce lobbying has already watered down the Volcker Rule. Same goes for the Dodd Frank OTC derivatives clearing reform measures. But these watering-down efforts reflects industry lobbying--Goldman Sachs is a key player--more than corporate customers.

In the end, it's a moot point. More liberal rules will not automatically kick start the industry. A pick up in the economy would do much more.

For more:
- here's the article

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