Derivatives Reform Would Cost Goldman Sachs 41% Of Earnings

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Geen wonder dat Buffett zo tegen hervorming is. Hij heeft tijdens de
crisis zo'n $5miljard in GS geïnvesteerd, en bovendien heeft hij zelf
$63miljard in derivaten op de balans staan.

Groet / Cees
		
Derivatives Reform Would Cost Goldman Sachs 41% Of Earnings
http://www.huffingtonpost.com/2010/04/30/derivatives-reform-would_n_558470.html

A research firm has a memo to big banks on derivatives reform: Be
afraid, be very afraid.

At the NYT's Dealbook, Cyrus Santi has word of a rather staggering new
report by Bernstein Research which projects that Goldman Sachs could see
a 41 percent drop in earnings if strict derivatives reform moves through
Congress. The total, per Santi's calculations, would be equivalent to
$3.9 billion hit to Goldman Sachs last 12 months of income.

President Obama has effectively drawn a line in the sand on the issue of
reining in Wall Street's barely regulated derivatives trade, indicating
he'd veto any bill that doesn't address the issue. The question, of
course, is just how strict derivatives reform will be.

Last week, Sen. Blanche Lincoln (D - Ark.) succeeded in moving her
derivatives reform bill out of the Senate Agriculture Committee-- with
GOP support. A newly popular provision would require that banks sell off
their derivatives trading units. The idea has ruffled feathers at the
Federal Reserve, which has joined the banking industry in opposing the
measure, the Wall Street Journal reports.

As the WSJ notes, derivatives reform would strike a big blow to JP
Morgan's earnings. The bank's CEO Jamie Dimon has supported greater
regulation for derivatives -- but he recently noted that even a neutered
bill could cost the bank "several hundred million to a couple billion
dollars" per year.

In addition, banks like Goldman and JP Morgan could be required to raise
an additional $250 billion in capital, Bloomberg BusinessWeek notes. FBR
Capital Markets analyst Paul Miller, a former examiner for the Federal
Reserve Bank of Philadelphia, told BusinessWeek that, "The Street now is
just realizing that all of this stuff is getting in the bill."

Brian Gardner, a research analyst at Keefe, Bruyette and Woods, told The
Hill that Wall Street is being caught offguard by the momentum behind
reform. "The old rules have been totally reversed," he said. "The world
we're all used to living with -- which is the House overreaches and the
Senate cools it down -- is not true."

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