Aug. 13, 2010 (United Press International) -- The U.S. bank (NYSE:USB) deemed likely to suffer most from financial reform could endure only modest losses, an industry analyst at Bank of America (NYSE:BAC) Merrill Lynch said.
The firm in question, Goldman Sachs (NYSE:GS) , has said it derives 10 percent of its revenue from trading that will be illegal when the regulatory law takes effect, The Washington Post reported Friday.
In a recent research note, analyst Guy Moszkowski said, "Unless the market making rules turn out to be draconian, GS does not anticipate significant revenue loss from FinReg."
The bill prohibits banks from trading with their own money, a tactic known as proprietary trading and which is a big revenue source for Goldman Sachs.
Before the law takes effect, steps need to be taken, including a survey of banks to assess bank trading, after that rules need to be written that clearly delineate the difference between proprietary lending and making trades on a client's behalf, the Post said.
Last week, U.S. Sens. Carl Levin, D-Mich., and Jeff Merkley, D-Ore., sent a letter advising regulators, "The law is clear: The risky and abusive financial practices that drove our country into an economic ditch must end."
The senators urged regulators to write, "full and faithfully follow that directive."
Fellow at the Brookings Institution Douglas Elliott, a former investment banker, said the law had an "arbitrary" component to it. "The … rule requires an arbitrary decision as to when it's a type of bet we don't want them to make and when it's acceptable."
