This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

'Grandpa' Goldman Trots Out History to Justify Commodities Business

NEW YORK ( TheStreet) -- History is chic, and Goldman Sachs (GS) hopes to make selective use of it to stay in the commodities business despite increased media and government scrutiny and plans by rival JPMorgan Chase (JPM) to exit the space.

"Our basis for being in the physical commodities business is having been grandfathered in it at the time we became a bank holding company," Blankfein told CNBC Wednesday. "We have a slightly different status than other banks in that because there is that legislative grandfathering solution. Embedded in that notion of being grandfathered is that we have been in it for a long time over 100 years. We were J. Aaron and Company."

Goldman, along with Morgan Stanley (MS), became a bank holding company in 2008 "based on the recognition that such regulation provides its members with full prudential supervision and access to permanent liquidity and funding," Blankfein said in a prepared statement at the time of the change in status.

Access to funds was all that mattered to financial institutions in Sept. 2008 and regulators -- doing everything they could to prevent the financial crisis from deepening -- were eager to stave off the collapse of companies like Goldman. The fact that many of those regulators, such as then-Treasury Secretary Hank Paulson and then-New York Federal Reserve Chairman Stephen Friedman, were former Goldman executives, would prompt lots of questions soon after those emergency measures were taken.

In other words, the fact that Goldman was allowed to keep its commodities business in 2008 when it became a bank holding company says little about whether it should be allowed to keep it today. Similarly, the fact that Goldman acquired J. Aaron in 1981, or that Blankfein and Goldman President Gary Cohn got their start there, does not mean Goldman has been in the commodities business for more than 100 years.

Goldman, Morgan Stanley, JPMorgan and other financial companies have developed very large businesses in so-called "physical commodities." They own tankers, aluminum storage facilities and other industrial assets that give them keen insights into -- and perhaps control over -- prices.

Legislators such as Elizabeth Warren (D., Mass.) want to return to the 1930s days of Glass Steagall when financial institutions had fewer tentacles. Using the word "grandfather" a lot and noting Goldman bought a 100-year-old company in the 1980s is unlikely to trick Warren and her ideological compatriots, but Blankfein apparently believes it's worth a try.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs