Monday, September 13, 2010

Trading Eludes Dodd-Frank as Investors See Black Box

Image representing Goldman Sachs as depicted i...

Image via CrunchBase

By Bradley Keoun

It took a Congressional inquiry this year to force Goldman Sachs Group Inc. to disclose how much it made in the mortgage market -- and that was only for 2007.

Goldman Sachs hasn’t revealed mortgage-trading revenue since then, leaving investors to guess how much it contributes to thefixed-income, currency and commodities division, or FICC, which also trades junk bonds, yen, oil and uranium, sells weather derivatives and operates power plants. The division brought in $23.3 billion last year, or 52 percent of the New York-based firm’s total, and by itself would rank 90th by revenue in the Standard & Poor’s 500 Index, just ahead of McDonald’s Corp., according to data compiled by Bloomberg.

The Dodd-Frank Act, designed to prevent future financial crises, does little to improve investors’ ability to analyze results at the five biggest U.S. firms that trade securities, which together lost $38.6 billion as markets froze in the fourth quarter of 2008. Since taxpayers may have to bail out banks again, firms should be forced to disclose more, said Tanya Azarchs, former head of North American bank research at Standard & Poor’s.

“The health of the banking system impinges on all areas of the economy,” said Azarchs, now a consultant in Briarcliff Manor, New York. “So their disclosure has to be top-notch.”

Trading Eludes Dodd-Frank as Investors See Black Box

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