Will Goldman Allay Concerns Over Volcker Violations With Increased Transparency?
Transparency has been a hot issue in the wake of the financial crisis. Big banks lost a lot of credibility after the markets crashed, credit tightened up, foreclosures grew rampant, and trading scandals made headlines. Classic problems of information equity aside, investors want to know what banks are up to.
Goldman Sachs (NYSE:GS) made headlines on Tuesday for apparently violating the intentions of the Volcker rule of the 2012 Dodd-Frank act. The Volcker rule is intended to curb risky proprietary trading behavior at banks — making big bets with their own money, which led to some big losses during the crisis — and CEO Lloyd Blankfein had publicly stated that his bank had since checked such risky behavior at the door. Reports indicate that the Multi-Strategy Investing unit behaves much like a hedge fund, with an “appetite for risk.”
But the existence of a “secretive” group called Multi-Strategy Investing calls Blankfein’s commitment to Washington’s new regulations into question. Of course, this is no surprise given the general state of combativeness between the government and the financial sector right now. But the perception that a trusted CEO of a well-respected bank is trying to keep something under wraps is concerning to more than just regulators…
However, despite what might be a skeleton in the closet, Goldman is making a good-faith effort to increase its transparency above and beyond the bare minimum required by law. The Wall Street Journal reports that the bank will begin disclosing the values of its money-market mutual funds on a daily basis, instead of on a monthly basis. What’s more, it will post the net asset value of its three U.S. commercial-paper funds directly to its website, and by the end of the year will report daily prices on its six offshore funds.
As the eighth-largest money-fund player, Goldman manages about $133 billion in assets out of a $2.7 trillion industry. JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) also manage large money funds, and to date have disclosed the value of theirs on a monthly basis, which is what the law currently requires. The Securities and Exchange commission then discloses the information publicly 60 days after it is received.
The change in disclosure policy doesn’t seem likely to materially change much of anything, but it is a welcome gesture from an industry that has been mired in controversy for years.
Don’t Miss: Did Washington D.C. Make the U.S. Pessimistic?