No wonder Goldman has resisted derivatives regulation so fiercely. A huge percentage of the firm’s revenue comes from these activities (hat tip R.W.). The Wall Street Journal is reporting that as much as a third of the firm’s revenue came from derivatives last year.
Goldman Sachs Group Inc. told the Financial Crisis Inquiry Commission that 25% to 35% of its revenue comes from derivatives-based businesses, according to a person familiar with the situation…
A memo sent to the panel Thursday night by the New York company included an analysis of derivatives-based revenue at Goldman from 2006 through 2009, said the person familiar with the matter. Based on the percentages provided by Goldman, such businesses generated $11.3 billion to $15.9 billion of the company’s $45.17 billion in net revenue for 2009.
Question: why is a report this important buried in late Friday news? Wouldn’t people like to know what was at stake for these firms regarding financial reform? Another question: why the range of figures? Surely Goldman knows how much revenue it generates from specific activities.
The analysis was based on a "best guess" of the main type of trading on each Goldman trading desk at the firm, said the person familiar with the matter.
So there you have it – a "best guess." If it’s good enough for the commission, then it must be good enough for us. Goldman has received a major slap on the wrists in the form of a $550 million settlement with the SEC. But now, its back to making money – 25-35% in derivates.
Clearly, this inquiry commission is just a charade.
Also see how Goldman Sachs May Spin Off Proprietary Trading This Month to get around the Volcker rule legally and continue business as usual.