GS Explainer

I can't stop talking about banking law! Today, I offer an outline of what Goldman Sachs is up to.

Goldman Sachs Group (GS) owns a Utah-chartered industrial bank called Goldman Sachs Bank USA (Bank). GS wants to convert Bank into a regular Utah-chartered bank. However, before it can ask Utah to change Bank it needs approval from the Federal Reserve to own a regular bank.

So, GS and its subsidiary Goldman Sachs Bank USA Holdings LLC (Holdings) applied to the Fed under section 3 of the Bank Holding Company Act to be recognized as bank holding companies. The Fed approved the application immediately, but that caused another problem ...

GS also owns a registered broker-dealer called Goldman Sachs & Co. (Co.). Section 21 of the Bank Holding Company Act forbids bank holding companies from owning securities dealers.

Therefore, GS has to make another application to the Fed to be recognized as a financial holding company (for more about the relationship between bank holding companies and financial holding companies, see yesterday's post).

In the end GS will be adding a bunch of new regulatory layers to their already crowded dance card. GS is a publicly traded company and a consolidated supervised entity under the alternative minimum capital rules of rule 15c3-1. Co., as a broker-dealer, is regulated by the SEC. Bank is presently regulated by the State of Utah and the FDIC.