Remember in the mid-aughts when HSBC and Bank of America and Deutsche Bank and pretty much everyone else on Wall Street more or less simultaneously struck upon the idea that acquiring a mortgage operation would be a fun and profitable thing to do? We know now how that turned out for them. We also know how it turned out for those, like Goldman Sachs, that lacked either the inclination or the commercial banking licenses to do so.
It's not that Goldman kept its hands out of the subprime jar or steered totally clear of crisis pains – it just didn't look quite as dumb when the dust finally settled. Lloyd and Co. got into the mortgage act like everyone else, but they had the foresight to avoid getting so drawn into it that they impulse-bought a shady home lender.
Well, turns out Goldman is finally zigging with the rest of them:
Goldman Sachs is acquiring Genesis Capital, a private Los Angeles firm that backs investors seeking to buy, renovate and quickly sell single-family homes, according to people familiar with the matter. Genesis, founded in 2007, has been growing rapidly as the housing market continues to recover. Last year, the firm lent $1 billion, up from $50 million in 2013.
Yes, Goldman Sachs is going to start writing checks for second-career real estate brokers in flyover country to snatch up foreclosed homes, clear out the disused meth labs and cover it all up with open-concept kitchens and massage jacuzzis. Needless to say, this isn't exactly the Goldman aesthetic:
But as with Goldman: Marcus Is Still Totally A Thing!
">Marcus, Goldman's foray into the burgeoning field of giving money to individuals on the promise that they pay it back with interest, there is some underlying logic here:
In its foray into lending, Goldman has chosen its spots carefully, avoiding areas that would put it in direct competition with the large commercial-banking rivals and focusing on niche products where there is room to grow. Home-flipping finance, while a niche of the giant residential-mortgage market, has become a bigger business again, after falling sharply after the crisis.
You may doubt Goldman's ability to jump into a new space like this and just kinda improv. But it wouldn't be the first time the bank has felt a creeping ennui whose only cure is finding something new to conquer. This is something that Goldman just does, and it tends to work out for them.
But buying a home lending company isn't just a business move – it's a style statement. The Genesis acquisition isn't just uncool, it's aggressively uncool – which according to established theory, can make something cool again. Although Goldman getting into house-flipping doesn't make house-flipping cool, getting into house-flipping does make Goldman cool.
Also there's a bunch of money to be made, so there's that.