Goldman Sachs' (NYSE:GS) Access to Capital

Goldman Sachs and Capital

Goldman Sachs (NYSE:GS) has legitimate concerns over which direction the politician will go in regulating the banking industry, as they rely up capital markets to fund their core business, and if something is done to dry that source up or shrink it, Goldman Sachs and other banks and financial institutions relying on investing to generate significant profits could really suffer.

Some have asserted Goldman will acquire a retail bank if regulations end up choking them too much, but that would do nothing for them, as Goldman spokesman Lucas Van Praag said, “What would buying a retail bank really do for us? We could increase deposits in a heartbeat if we wanted to without buying a bank, but that wouldn't help us finance our core business. We're a wholesale firm that relies on funding from the capital markets and makes money from bid-offer spreads, not net interest income.”

While I don't see even the clowns in Washington doing something stupid enough to destroy the industry, but then again, they bailed out the industry when they should have allowed the market to determine the quality companies, which would have resulted in a robust and healthy financial sector going forward.

But you never know, politicians live primarily only to get re-elected, and they've done incredibly destructive things to that end.

For Goldman Sachs, it'll be very interesting to see how their capital requirements will be met if lawmakers to go the stupid route, which I give them about a 50/50 chance of doing.

Goldman Sachs and Capital