Goldman investment strategist Abby Joseph Cohen is sounding very bullish on the second half of this year. She says corporate profitability may be up dramatically from the second quarter of 2008. But taking a look at her word choice, it seems like something else is at the forefront of her mind. After describing investor fears of inflation as “spectacularly premature”, she went on to caution that the “spunk” of consumption growth seen earlier this decade will not return. However, she did say that Bernanke had been “extraordinarily effective” during this crisis.
Goldman’s Cohen sees inflation at bay [Reuters]
GS
Now that Goldman has received the green light to pay back TARP, the firm’s next hurdle is losing the commercial bank holding company status. While Goldman’s overall model has not changed much since it became a commercial bank in September, it is subject to additional supervision and regulations that constrain profitability.
With the worst of the financial crisis seemingly over, the benefits of being a bank holding company are outweighed by the restrictions and conditions, said Tom Sowanick, the chief investment officer of Princeton, New Jersey-based Clearbrook Financial LLC.
Since Goldman became a commercial bank, industry watchers have said the change would expose the firm to stringent capital requirements, dampening its ability to use borrowed money to boost profits for its lucrative proprietary trading business.
It is going to be a long road back to the point where regulators have some degree of trust in large firms to not blow up themselves or the banking system. Given all the GS favoritism conspiracy theories in DC, allowing them in particular to crank up the leverage again seems unlikely.
Goldman could shed “commercial bank” charter [Reuters]
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