Quote of the day, Goldman edition

By Felix Salmon
January 21, 2010
David Viniar, responding to confusion over whether the squid's 36% compensation ratio for 2009 is here to stay:

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Quote of the day comes from Goldman Sachs CFO David Viniar, responding to confusion over whether the squid’s 36% compensation ratio for 2009 is here to stay:

“I take this year’s revenue ratio not necessarily as a onetime thing and not necessarily not as a onetime thing,” Mr. Viniar said on the conference call. “We will know more as the quarter and the year unfolds.”

Glad that’s cleared up, then.

Viniar also said that, yes, Goldman does have proprietary trading operations, which account for “10ish” percent of its revenues. Does anybody believe that only 10% of Goldman’s revenues come from trading for its own account? I don’t — but as I say, the lines are fuzzy. As far as I know, Goldman already has no dedicated prop desk, and it’s child’s play to simply reclassify any given trade as being in some way client-related. So while I like the idea that the Obama administration is going to try to crack down on prop trading with its new Volcker rule, I’m not at all convinced it’s doable.

3 comments

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In a lot of cases, client activity is taken on specifically to generate prop trading revenue. For instance, one of the biggest incentives for investment banks to underwrite asset/mortgage backed securities in Europe was to be able to write the lucrative currency/interest rate swaps. That picture is slightly different now because of tightened counterparty criteria for securitisations, but the principle still applies.

Posted by GingerYellow | Report as abusive

GingerYellow – I have seen this phenomemenon too

Posted by vk9141 | Report as abusive

are you serious? when you say Goldman already has no dedicated prop desk, do you mean they shut them down in the last 6 months. All of them? In every country? In every asset class?

You ignore the principal investment business which is huge. That is an easy one to regulate.

If they don’t lend, don’t bail them out. That is the key to the rule. Especially since none of the cheap money that the fed has given the banks have wound up in the real economy instead of financial instruments collecting a spread.

Posted by randolfduke | Report as abusive