How will Goldman Sachs look 'honest' as they spin off prop trading because of Volker rule?

(Last Updated On: August 5, 2010)

How will Goldman Sachs look ‘honest’ as they spin off prop trading because of Volker rule?

There was an announcements in how Goldman Sachs will spin off its prop trading desk. This is in compliance with the new Volker rule introduced by the American government. I am sure there will be a ‘secret’ link back to the mother ship of Goldman Sachs.
Prop trading desks are proving to be the most popular division within any of these large investment banks including Morgan Stanley.
When Goldman Sachs announced this, their shares climbed 1.7 percent to $155.77 in early-afternoon trading. A Goldman spokesman was not immediately available for comment.
The Volker rules puts major constraints s on the size of private equity or hedge fund investments.
Many have blamed the likes of these prop trading desks of large investments banks like Morgan Stanley or Goldman Sachs as one of the sources of the 2008 financial meltdown.
It also does not look positive for an investment bank like Goldman Sachs to pay out 550 million dollars to settle with the U.S. Securities and Exchange Commission for civil fraud charges over how it marketed a subprime mortgage product to institutional investors.
One person on one of Linked in groups made the comment of:

In my view any fulfillment of the Volcker Rule remains a 50% initiative, leaving back doors and schemes, where banks may add profits to their balance sheets even if prop trading is spun off and still being able to off load losses though exotic vehicles.

I am a son of the eighties and INMHO US legislators just had to reinstall the Glass – Steagal Act (complete separation between investment and commercial banking), in an improved and modernized form of course. The new financial legislation is a failure to go to the end of the issue and will therefore create more systemic risk then ever before, like very 50% project.

This is a very appropriate comment if you ask me.

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

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