Another Round of Layoffs coming to Goldman Sachs

Revelations 13:16-18 “Also it causes all, both small and great, both rich and poor, both free and slave, to be marked on the right hand or the forehead, so that no one can buy or sell unless he has the mark, that is, the name of the beast or the number of its name. This calls for wisdom: let the one who has understanding calculate the number of the beast, for it is the number of a man, and his number is 666.”

Important Takeaways:

  • Goldman Sachs to chop 250 more workers after ‘David’s Demolition Day,’ sources say
  • Goldman Sachs plans to make another round of job cuts — its third in less than a year — as dealmaking profits continue to tank, sources told The Post on Tuesday.
  • The David Solomon-led investment bank will cull an additional 250 workers on the heels of 3,200 being fired in January in what staff had dubbed “David’s Demolition Day,” an insider said.
  • The latest layoffs could come in the next few weeks and the cuts will hit employees at every level including managing directors and other senior executives, according to the Wall Street Journal.
  • In September, the Wall Street giant — which had 45,000 employees — had pink-slipped 1% to 5% of its under-performers.
  • A Goldman Sachs spokesperson declined to comment.

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Goldman Sachs releasing 3,200 employees

Goldman's Job Cuts

Revelations 18:23:’For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • Goldman Sachs is cutting up to 3,200 employees this week as Wall Street girds for tough year
  • The global investment bank is letting go of as many as 3,200 employees starting Wednesday, according to a person with knowledge of the firm’s plans.
  • That amounts to 6.5% of the 49,100 employees Goldman had in October, which is below the 8% reported last month as the upper end of possible cuts.
  • Other investment banks are adopting a “wait and see” attitude: If revenues are tracking below estimates in February and March, the industry could cut more workers, said a person familiar with a leading Wall Street firm’s processes.

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U.S. regulator calls climate change a systemic risk

(Reuters) – Climate change poses a “slow motion” systemic threat to the stability of the U.S. financial system requiring urgent action from financial regulators, including the Federal Reserve and the Securities Exchange Commission.

That is one of the findings of a landmark report commissioned by the U.S. Commodity Futures Trading Commission and put together by a panel convened about 10 months ago by Rostin Behnam, one of two Democrats on the five-member CFTC.

The panel’s 35 members, including representatives of Goldman Sachs Group Inc., the Dairy Farmers of America, and The Nature Conservancy among others, approved the report on Tuesday.

“The physical impacts of climate change are already affecting the United States, and … the transition to net-zero emissions may also impact many segments of the economy,” the 196-page report said.

“Both physical and transition risks could give rise to systemic and sub-systemic financial shocks, potentially causing unprecedented disruption in the proper functioning of financial markets and institutions.”

A sudden shift in perceptions of the risks from frequent wildfires and intense hurricanes could bring a sudden drop in asset prices, for instance, that cascades through a community and spill more broadly into markets, the report said.

And because the COVID-19 pandemic has depleted household wealth, government budgets and business balance sheets, the economy is more vulnerable than before, it added, “increasing the probability of an overall shock with systemic implications.”

The report’s release comes less than two months ahead of a national election that pits Republican President Donald Trump, who says climate change is a hoax, against Democratic challenger Joe Biden, who calls climate change an “existential threat.”

Its first recommendation is to “establish a price on carbon” that is hefty enough to push businesses and markets to cut use of carbon dioxide-producing fuels such as oil and gas. Taxing carbon would require action by Congress.

But the report’s dozens of other recommendations amount to a call for a sweeping rewrite of financial market rules and norms that could go forward without any new laws and no matter who wins the presidency.

Among the proposals: requiring banks to address climate-related financial risks and listed companies to disclose emissions, and to stress test community banks for their resilience to climate change.

Regulators in Europe have worked for years on efforts to calibrate and mitigate climate risks to financial markets.

Regulators in the United States, where politicians regularly cast doubt on the fact that burning fossil fuels is affecting the earth’s climate, have lagged far behind on such work.

Only recently has the Federal Reserve begun to acknowledge the potential for climate change to destabilize the financial system, and to think about possible responses.

The report urges financial authorities to integrate climate risk “into their balance sheet management and asset purchases, particularly relating to corporate and municipal debt.”

It also calls for them to do research into the financial implications of climate change and join international climate-focused groups, such as the Network for Greening the Financial System, all of which appear to specifically apply to the Fed.

(Reporting by Ann Saphir in Berkeley, Calif.; Editing by Clarence Fernandez)

Big U.S. companies form group to boost hiring of minorities in New York

By Kanishka Singh

(Reuters) – Leaders from major U.S. companies, including banks and tech giants, have formed a group aimed at increasing the hiring of individuals from minority communities in New York.

The New York Jobs CEO Council, which counts chief executives from 27 firms among its members, aims to hire 100,000 people from low-income Black, Latino and Asian communities by 2030.

Jamie Dimon, chief executive of JPMorgan Chase & Co, IBM CEO, Arvind Krishna, and Accenture CEO, Julie Sweet, will co-chair the group.

Other companies in the group include Inc., Google, Microsoft Corp. and Goldman Sachs, according to a press statement.

U.S. companies have been under increasing pressure to do more to provide minority groups with access to opportunities in the wake of anti-racism protests sparked by the death of a 46-year-old African-American man, George Floyd. Floyd died in May after a white police officer knelt on his neck for nearly nine minutes.

The protests also came as minorities were disproportionately represented in coronavirus deaths, and lower-income communities in the United States were hit hard economically.

“Today’s economic crisis is exacerbating economic and racial divides and exposing systemic barriers to opportunity,” Dimon said in an opinion piece in the Wall Street Journal on Monday, adding that often high-achieving people across New York were not given opportunities at the city’s top employers.

“Young people in low-income and minority communities feel this failure the most. Unless we actively work to close the gap, COVID-19 will make matters worse,” said the opinion piece which was co-authored with Félix V. Matos Rodríguez, the chancellor of the City University of New York.

(Reporting by Kanishka Singh in Bengaluru; Editing by Edwina Gibbs)

Federal Reserve announces post-stress test capital ratios for large banks

By Pete Schroeder

WASHINGTON (Reuters) – The U.S. Federal Reserve announced on Monday how much each large bank that underwent its 2020 stress tests will have to hold in additional capital.

The results mark the first time the Fed has given out custom capital requirements for each bank under its new “stress capital buffer,” and takes effect on Oct. 1. Goldman Sachs and Morgan Stanley were ordered to hold the most capital of the 34 firms tested, with ratios of 13.7% and 13.4% respectively.

The custom capital requirements follow stress test results released in June, which found that banks would weather heavy capital losses should the economic fallout from the coronavirus pandemic drag on or worsen. The Fed ordered banks to cap dividend payments and bar share repurchases until at least the fourth quarter to ensure they have sufficient cushions.

The new capital ratio combines the minimum capital requirements of 4.5% and the new “stress capital buffer,” which is determined by how each bank fared under a hypothetical severe economic downturn. That buffer is at least 2.5%, but was highest for Deutsche Bank’s U.S. operations at 7.8%.

The nation’s largest banks also face an additional capital surcharge for their predominant role in the financial system, ranging from 1% to 3.5% for JP Morgan Chase, the nation’s biggest bank.

The Fed also announced that it had reaffirmed the stress test results for five banks that requested reconsideration: BMO Financial Corp., Capital One Financial Corp, Citizens Financial Group Inc, Goldman Sachs and Regions Financial Corp. The Fed said the additional review found its stress test models worked as intended and there were no errors.

(Reporting by Pete Schroeder; Editing by Chizu Nomiyama and Jonathan Oatis)

Goldman Sachs seeks up to $17 billion for private credit across two funds

By Andrew Hedlund

NEW YORK (LPC) – Goldman Sachs Merchant Banking Division (MBD) is seeking up to $17 billion for private credit investments for senior debt financings and special situations transactions, according to documents from Connecticut’s state pension plan.

Consisting of total investor commitments and anticipated leverage, MBD is targeting US$7bn for Broad Street Loan Partners IV (Loan Partners IV), according to the documents. The fund will participate in senior loan deals in the upper middle market and smaller deals in the broadly syndicated loan market.

A Goldman Sachs spokesperson declined to comment.

The Goldman unit is also seeking between US$5bn and US$10bn for West Street Strategic Solutions I (WSSS I), a special situations fund that will invest in transactions that include growth capital and balance sheet restructurings.

Loan Partners IV has raised approximately US$1bn from investors, excluding leverage, while WSSS I has raised approximately US$6.4bn, according to US Securities and Exchange Commission regulatory filings.

“We accelerated the marketing of a new credit fund called West Street Strategic Solutions as a part of our transition to fund-driven investing. Client receptivity has been very strong,” David Solomon, the firm’s chief executive officer, said on the bank’s second-quarter earnings call. “We believe this strategy is well-timed to capture opportunities in the market today and provide critical private financing to companies in need.”

MBD’s fundraise comes at a competitive time in the private credit market, with 486 funds in the market this month, the most in the past five-and-a-half years, according to data from research firm Preqin. Almost 300 of those vehicles are raising capital for direct lending, most often associated with senior debt, and special situations, according to the data.

Fund managers investing in direct lending and special situations are targeting more than US$124bn of the US$239bn being raised across private credit funds globally, as of July 2020, according to Preqin.

Concurrently, lending to private equity-backed companies in the middle market, the most common type of private credit transaction, fell as much as 70% in the second quarter, according to Refinitiv LPC data.

Limited partners (LPs) such as university endowments, insurance companies and pension funds invest in private credit funds.

The Connecticut pension fund is considering a US$350m commitment to Goldman Sachs’ investment funds to manage across different credit strategies, including Loan Partners IV and WSSS I.

The pension fund portfolio has a 5% allocation to private credit, Shawn Wooden, Connecticut state treasurer, said in an email.

“The purpose of this allocation is to generate attractive, risk-adjusted returns above public market debt strategies and reduce volatility through lower correlation to other asset classes,” he said.

The private credit allocation can include sub-strategies that invest in senior debt, junior debt, distressed debt and special situations, Wooden said.

After several months of caution following the Covid-19 outbreak, LPs have broadly resumed normal operations, according to a June investor survey from Campbell Lutyens, a firm that helps credit managers raise money.

Loan Partners IV will operate with fund-level leverage, which would allow Goldman Sachs to borrow money to invest alongside LPs’ commitments.

The two funds will mainly invest in North America-based companies. After paying investors’ fees, target returns for Loan Partners IV will be 10% and 12%-14% for WSSS I.

“Credit markets have been volatile during the beginning of 2020, and the coronavirus pandemic has the potential to undermine corporate fundamentals for some time,” Wade O’Brien, a managing director at investment and advisory firm Cambridge Associates, said in an email. “Attractive opportunities remain in credit, but investors may need a different playbook than the one developed during the last financial crisis.”

(Reporting by Andrew Hedlund; Editing by Michelle Sierra, Kristen Haunss and Paula Schaap)