Goldman Sachs & Online Bank, A Silly Notion (GS, ETFC)

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If you haven’t heard of a creative and backward way of trying to rapidly acquire assets, you can look to Goldman Sachs Group (NYSE: GS) this morning.  The WSJ is reporting that the investment bank gone bank-holding company is considering opening up an online bank.  While the report says that the firm is weighing this rather than having decided upon this, that is just so 1990’s.

Goldman Sachs has the best reputation among bulge bracket firms.  It has been wildly successful until recently and is on theverge of its first quarterly loss since coming public.  Goldman Sachsmay know how to milk money opportunistically out of the market, but thefirm would likely admit that it does not necessarily know how to run abank.  That might be particularly true if you consider thatan online bank would have zero relationships and is unlikely to bringit the wealthy accounts that might act as a base.

The world only has to think of great non-success stories in the realm of online-only banks.  Don’t take this to meanthat online banking is bad, because it may be the best thing sincesliced bread.  But having essentially an online-only bank won’t bringthe company what it needs.  It needs deposits that it can rest on, andthose deposits will be far less leveraged than its own operations in2007 and before.   

If Goldman Sachs wants to rapidly build a bank so it can secure newassets, it is going to have to go do it the old fashioned way: BUYING ABANK.  The WSJ noted that this has not been ruled out. If Goldman Sachs can’t figure out which one(s) to buy, then they should just ask around.  There are many that fit their image that could be acquired.  Even firms like E*TRADE (NASDAQ: ETFC) have actual offices forclients to go into….. Hint, Hint Goldman. 

Customers are unfortunately going to need bankers and possible bank locations more and moreafter the dust settles from all of this credit mess.  If Goldman Sachsis going to enter just the online banking realm, it might as well gointo online postage sales and start a DSL internet access service too.

Jon C. Ogg
December 3, 2008