'The Word of the Day Is "Comfortable".'Goldman Sachs ( GS) reported second-quarter earnings of $1.9 billion, or $3.70 a share, soundly beating the consensus estimate of $2.89, according to Bloomberg. The earnings beat was driven by $1.42 billion in revenue from its Investing & Lending unit, with rising marks on the company's private equity investments and its portfolio of equity and debt market securities. These key areas of Goldman's business are expected to be de-emphasized over coming years as the Volcker Rule and other new rules derived from the Dodd-Frank Wall Street Reform and Consumer Protection Act are finalized. Another important question for investors and analysts is how the bank's efforts to comply with the Federal Reserve's final rules to implement Basel III, and federal regulators' new leverage capital requirements may affect the return of capital to shareholders. After the Fed finalized its enhanced capital rules on July 2, the Fed, along with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. proposed a minimum Basel III supplementary Tier 1 leverage ratio of 6% for U.S. banks with total assets above $700 million, along with a 5% minimum ratio for the nation's largest bank holding companies, including Goldman. The new leverage ratio required is expected to be phased in starting in 2015, full compliance required by January 2018.
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