Proposed changes to the Volcker Rule could have a big effect on the way that Goldman Sachs Group Inc (NYSE:GS) and other financial heavyweights are conducting themselves. Critics point out that a risk-taking mentality could once again rule the day on Wall Street as a result of the proposed change.
CNBC shares some insight into what it means for Goldman Sachs and others.
Goldman Sachs traders lost $180 million last year on bad bets in natural gas markets, helping cause the worst commodities trading performance in the bank’s history as a public company.
The bank, a powerhouse in commodities trading for decades, had positioned itself to profit from volatility in natural gas prices that never materialized, according to people with knowledge of the situation. At rival firm Morgan Stanley, power and gas traders led by rising star Jay Rubenstein generated almost $400 million in revenue for the bank last year.
While a relaxing of rules could be a boon for trading operations at Goldman Sachs, Morgan Stanley, and other financial giants, it also opens up the possibility of even more risk being taken on by them on a daily basis. As risk tolerance increases, the chances for blowup also ramps up.
For the financial giants that already had to be reeled in about a decade ago due to poor risk management, we can only hope that those lessons were taken to heart.
Goldman Sachs Group Inc shares were trading at $232.81 per share on Friday morning, down $0.64 (-0.27%). Year-to-date, GS has declined -8.04%, versus a 4.18% rise in the benchmark S&P 500 index during the same period.
GS currently has a StockNews.com POWR Rating of C (Neutral)and is ranked #19 of 29 stocks in the Investment Brokerage category.
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