Goldman Sachs Did Not Violate the Volcker Rule (And $1 Billion Is a Drop in the Bucket Anyway) - Quartz
Nice Gig if you can get it:
But there is no Volcker Rule at the moment. Its implementation through regulation is in proposal stage and the proposal is being thoroughly revised in response to a raft of commentary—so there is nothing Goldman violated.
Here’s the secret about that secret Goldman Sachs team that made headlines this week: It’s not really doing anything wrong.
Bloomberg News reported that the investment bank is sidestepping the so-called Volcker rule by having a group within the firm, with $1 billion of assets under management, make risky “hedge fund” type investments.
Take this story with a large grain of salt. The Volcker Rule, enacted by Congress, prohibits proprietary trading but also permits market-making and long-term investment. Market-making is important to the economy because it supplies liquidity for investments. Without liquidity issuers of debt and equity would have to pay more for their funds because investors with less liquid investments would face more risk. Banks are also allowed to invest their excess funds in longer-term investments. As for any investor, it is prudent to diversify a portfolio with investments of different types, with some investments more risky than others.