Goldman tells analysts No Prob after FinReg passes

Tagging along behind Matt Taibbi's big Rolling Stone piece on Obama's Financial Regulation bill (technically, the Dodd–Frank bill), we get this, from the L.A. Times, along with Taibbi's comment. (Our big piece on Dodd–Frank, with all its tasteful who-screwed-who is here.)

First the Times. The article starts (my emphasis):

As Wall Street scrambles to find the best and most profitable way to operate under the new financial reform law, Goldman Sachs Group Inc. — the firm that was expected to suffer the most under the legislation — could emerge practically unscathed.

Right after Congress passed the regulatory overhaul bill last month, analysts estimated that as much as one-tenth of the preeminent investment bank's earnings could vanish because of new restrictions on activities targeted by the regulatory overhaul.

More recently, however, top Goldman executives privately advised analysts that the bank did not expect the reform measure to cost it any revenue.

Hey, I got yer Dodd–Frank right here. Then the Times writer hedges and talks about changes the new law would force:

Citigroup Inc. analysts recently reported that Goldman executives told them the law would force the firm to reduce its own private equity holdings, accelerating a reduction that had been underway. A Goldman spokeswoman declined to comment on the report.

Etc. The writer appears to be saying: On the one hand, it looks like Goldman is laughing through its teeth; on the other hand, nice work, Mr. Administration, whose contacts I still need, for forcing real change, just like you promised. Etc.

Taibbi comments (my emphasis):

The LAT story suggests that banks like Goldman have either figured out how to compensate for their lost prop trading revenue, or else they’ve figured out a way to keep doing what they have been doing, only in some other form. . . .

I’ve been hearing that the clearing/exchange-trading requirement is not as solid as some thought it might be. In particular some critics are saying that the clearing requirement may be problematic because the banks have tremendous influence over clearing-houses like the Intercontinental Exchange (ICE) and the Chicago Mercantile Exchange (CME). But this LAT story also suggests that the banks are not concerned with that section of the bill. . . .

There are a lot of unknowns about how this is all going to play out, but it’s certainly interesting that the people who should know best about how all of this is going to work appeared to have made a judgment already.

Sounds about right. Goldman got the bill it wanted, and now it's telling stock analysts (who will comment on Goldman's stock price post–Dodd–Frank): Hey, no prob.

I don't think I'd bet they're wrong.

GP