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  • Goldman Sachs' Redacted GE Filing With Federal Reserve As Provided To Inner City Press, Dec 2, 2015

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    Matthew Russell Lee
    125 Ansichten11 Seiten
    Goldman Sachs Blacks Out Basic Info From Fed Response, ICP Appeals By Matthew R. Lee NEW YORK, December 2 -- The lack of seriousness in US bank regulation grows from the relatively smaller to the largest banks, with Goldman Sachs the most recent example. Goldman is trying to speed through Federal Reserve approval to buy $16 billion in insured deposits from GE Capital, and the Fed, documents released to Inner City Press under the Freedom of Information Act (FOIA) show, is inappropriately bent on helping, including by closing its comment period. Now on December 2, Goldman Sachs has sent Inner City Press a heavily redacted copy of its submission to the Federal Reserve. Inner City Press immediately submitted this under FOIA: "This is a FOIA request for the entirety of the December 2 submission in connection with the 'Application by Goldman Sachs Bank USA for the Acquisition by Purchase and Assumption of Certain Deposit Liabilities and Certain Very Limited Non-Financial Assets of GE Capital Bank,' of which a heavily redacted copy was sent to Inner City Press, as a timely commented, by Goldman Sachs' outside counsel past 10 pm on December 2. On the cover letter, referring to a “Confidential Application,” much is redacted; four exhibits are withheld in full. Given this, ICP contests and is hereby request all of this information. On Response 1, after the words “Strategic Plan,” there are heavy redactions. Later, Goldman Sachs tries to withhold even what is seeks to acquire. Exhibits A, B, C and D are withheld in full. ICP is requesting all of them." On November 19, Goldman Sachs submitted a purported reply to the Federal Reserve, stating among other things that "Certain Comment Letters express concern with the contact between GS Bank and Board staff prior to GS Bank submitting the Application. GS Bank respectfully submits that the contact was both appropriate and ordinary in the context of the Board’s own guidance on pre-filing communications.11 Additionally, the allegations of contact are not germane to the scope of the statutory factors set forth for Board consideration under the Bank Merger Act." The 2012 Fed letter Goldman Sachs cites was meant to benefit smaller banks - and did not envision Additional Information letters before the public was even notified of the proposal. The misuse of small bank "regulatory relief" by the likes of Goldman Sachs casts new light of legislative riders being considered for the US spending bill due December 11. Going forward, KeyCorp is trying to buy First Niagara, and NY Community Bank wants to buy Astoria; there will be opposition. As to Goldman Sachs, Inner City Press / Fair Finance Watch filed a supplement comment on October 30 including Goldman's new and troubling settlement with the NYS Department of Financial Services regarding a former Federal Reserve employee impermissibly using Fed information for them. Public hearings and an extension of the comment period are needed. As detailed below, the Federal Reserve's General Counsel Scott Alvarez solicitiously agreed to weekend phone calls with Goldman's outside council Rodgin "Rodge" Cohen at Sullivan & Cromwell, and the Fed submitted its "Additional Information" request to Goldman in July, a full month before any application was submitted or the deal publicly announced. Thus there was no way for the public to be involved in the Fed's review, which is required by the Bank Merger Act (and the Administrative Procedures Act). The Fed began trying to essentially pre-approve some applications with a 2012 letter to banks, here - but it said no major issues could be addressed this way, and the interchanged would be subject to FOIA. In this case, though, where Inner City Press submitted its FOIA request as soon as it became aware of Goldman's GE proposal and application, none of the information would have been available until after the comment period was set to close on September. It has been extended to October 30, due to re

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    Goldman Sachs' Redacted GE Filing with Federal Reserve as Provided to Inner City Press, Dec 2, 2015

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    Goldman Sachs Blacks Out Basic Info From Fed Response, ICP Appeals By Matthew R. Lee NEW YORK, December 2 -- The lack of seriousness in US bank regulation grows from the relatively smaller to the largest banks, with Goldman Sachs the most recent example. Goldman is trying to speed through Federal Reserve approval to buy $16 billion in insured deposits from GE Capital, and the Fed, documents released to Inner City Press under the Freedom of Information Act (FOIA) show, is inappropriately bent on helping, including by closing its comment period. Now on December 2, Goldman Sachs has sent Inner City Press a heavily redacted copy of its submission to the Federal Reserve. Inner City Press immediately submitted this under FOIA: "This is a FOIA request for the entirety of the December 2 submission in connection with the 'Application by Goldman Sachs Bank USA for the Acquisition by Purchase and Assumption of Certain Deposit Liabilities and Certain Very Limited Non-Financial Assets of GE Capital Bank,' of which a heavily redacted copy was sent to Inner City Press, as a timely commented, by Goldman Sachs' outside counsel past 10 pm on December 2. On the cover letter, referring to a “Confidential Application,” much is redacted; four exhibits are withheld in full. Given this, ICP contests and is hereby request all of this information. On Response 1, after the words “Strategic Plan,” there are heavy redactions. Later, Goldman Sachs tries to withhold even what is seeks to acquire. Exhibits A, B, C and D are withheld in full. ICP is requesting all of them." On November 19, Goldman Sachs submitted a purported reply to the Federal Reserve, stating among other things that "Certain Comment Letters express concern with the contact between GS Bank and Board staff prior to GS Bank submitting the Application. GS Bank respectfully submits that the contact was both appropriate and ordinary in the context of the Board’s own guidance on pre-filing communications.11 Additionally, the allegations of contact are not germane to the scope of the statutory factors set forth for Board consideration under the Bank Merger Act." The 2012 Fed letter Goldman Sachs cites was meant to benefit smaller banks - and did not envision Additional Information letters before the public was even notified of the proposal. The misuse of small bank "regulatory relief" by the likes of Goldman Sachs casts new light of legislative riders being considered for the US spending bill due December 11. Going forward, KeyCorp is trying to buy First Niagara, and NY Community Bank wants to buy Astoria; there will be opposition. As to Goldman Sachs, Inner City Press / Fair Finance Watch filed a supplement comment on October 30 including Goldman's new and troubling settlement with the NYS Department of Financial Services regarding a former Federal Reserve employee impermissibly using Fed information for them. Public hearings and an extension of the comment period are needed. As detailed below, the Federal Reserve's General Counsel Scott Alvarez solicitiously agreed to weekend phone calls with Goldman's outside council Rodgin "Rodge" Cohen at Sullivan & Cromwell, and the Fed submitted its "Additional Information" request to Goldman in July, a full month before any application was submitted or the deal publicly announced. Thus there was no way for the public to be involved in the Fed's review, which is required by the Bank Merger Act (and the Administrative Procedures Act). The Fed began trying to essentially pre-approve some applications with a 2012 letter to banks, here - but it said no major issues could be addressed this way, and the interchanged would be subject to FOIA. In this case, though, where Inner City Press submitted its FOIA request as soon as it became aware of Goldman's GE proposal and application, none of the information would have been available until after the comment period was set to close on September. It has been extended to October 30, due to re

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    Goldman Sachs' Redacted GE Filing With Federal Reserve As Provided To Inner City Press, Dec 2, 2015

    Hochgeladen von

    Matthew Russell Lee
    Goldman Sachs Blacks Out Basic Info From Fed Response, ICP Appeals By Matthew R. Lee NEW YORK, December 2 -- The lack of seriousness in US bank regulation grows from the relatively smaller to the largest banks, with Goldman Sachs the most recent example. Goldman is trying to speed through Federal Reserve approval to buy $16 billion in insured deposits from GE Capital, and the Fed, documents released to Inner City Press under the Freedom of Information Act (FOIA) show, is inappropriately bent on helping, including by closing its comment period. Now on December 2, Goldman Sachs has sent Inner City Press a heavily redacted copy of its submission to the Federal Reserve. Inner City Press immediately submitted this under FOIA: "This is a FOIA request for the entirety of the December 2 submission in connection with the 'Application by Goldman Sachs Bank USA for the Acquisition by Purchase and Assumption of Certain Deposit Liabilities and Certain Very Limited Non-Financial Assets of GE Capital Bank,' of which a heavily redacted copy was sent to Inner City Press, as a timely commented, by Goldman Sachs' outside counsel past 10 pm on December 2. On the cover letter, referring to a “Confidential Application,” much is redacted; four exhibits are withheld in full. Given this, ICP contests and is hereby request all of this information. On Response 1, after the words “Strategic Plan,” there are heavy redactions. Later, Goldman Sachs tries to withhold even what is seeks to acquire. Exhibits A, B, C and D are withheld in full. ICP is requesting all of them." On November 19, Goldman Sachs submitted a purported reply to the Federal Reserve, stating among other things that "Certain Comment Letters express concern with the contact between GS Bank and Board staff prior to GS Bank submitting the Application. GS Bank respectfully submits that the contact was both appropriate and ordinary in the context of the Board’s own guidance on pre-filing communications.11 Additionally, the allegations of contact are not germane to the scope of the statutory factors set forth for Board consideration under the Bank Merger Act." The 2012 Fed letter Goldman Sachs cites was meant to benefit smaller banks - and did not envision Additional Information letters before the public was even notified of the proposal. The misuse of small bank "regulatory relief" by the likes of Goldman Sachs casts new light of legislative riders being considered for the US spending bill due December 11. Going forward, KeyCorp is trying to buy First Niagara, and NY Community Bank wants to buy Astoria; there will be opposition. As to Goldman Sachs, Inner City Press / Fair Finance Watch filed a supplement comment on October 30 including Goldman's new and troubling settlement with the NYS Department of Financial Services regarding a former Federal Reserve employee impermissibly using Fed information for them. Public hearings and an extension of the comment period are needed. As detailed below, the Federal Reserve's General Counsel Scott Alvarez solicitiously agreed to weekend phone calls with Goldman's outside council Rodgin "Rodge" Cohen at Sullivan & Cromwell, and the Fed submitted its "Additional Information" request to Goldman in July, a full month before any application was submitted or the deal publicly announced. Thus there was no way for the public to be involved in the Fed's review, which is required by the Bank Merger Act (and the Administrative Procedures Act). The Fed began trying to essentially pre-approve some applications with a 2012 letter to banks, here - but it said no major issues could be addressed this way, and the interchanged would be subject to FOIA. In this case, though, where Inner City Press submitted its FOIA request as soon as it became aware of Goldman's GE proposal and application, none of the information would have been available until after the comment period was set to close on September. It has been extended to October 30, due to re

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    PUBLIC REDACTED VERSION

    SUPPLEMENT
    TO THE

    CONFIDENTIAL APPLICATION
    PURSUANT TO
    THE
    BANK MERGER ACT
    12 U.S.C. 1828(C)
    SUBMITTED TO THE

    BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM


    FOR THE
    PURCHASE AND ASSUMPTION TRANSACTION
    BY AND AMONG

    GOLDMAN SACHS BANK USA


    200 WEST STREET
    NEW YORK, NEW YORK 10282

    GE CAPITAL BANK
    6510 MILLROCK DRIVE, SUITE #200
    HOLLADAY, UTAH 84121
    AND

    GENERAL ELECTRIC CAPITAL CORPORATION


    901 MAIN AVENUE
    NORWALK, CONNECTICUT 06851
    SUBMITTED

    December 1, 2015

    DC_LANOI :318965.9

    PUBLIC REDACTED VERSION


    RESPONSES OF THE GOLDMAN SACHS GROUP, INC.
    AND GOLDMAN SACHS BANK USA
    TO THE REQUEST FOR ADDITIONAL INFORMATION

    December 1, 2015
    Set forth below are the responses of The Goldman Sachs Group, Inc. ("GS Group", and,
    together with its subsidiaries, the "Firm") and/or Goldman Sachs Bank USA ("GS Bank"), as
    applicable, to the Board of Governors of the Federal Reserve System (the "Board") staffs
    questions, dated October 20, 2015 and November 10, 2015, relating toGS Bank's application
    (the "Application") pursuant to the Bank Merger Act, 12 U.S.C. 1828(c), for prior approval to
    acquire by purchase and assumption certain deposit liabilities and certain very limited nonfinancial assets of GE Capital Bank, a Utah state-chartered non-member industrial bank ("GE
    Bank"). Preceding each response, the related question is restated in bold. Capitalized terms not
    otherwise defined herein shall have the meanings set forth in the Application.

    1.

    Explain how the proposed acquisition of GE Bank's retail deposit platform is


    consistent with GS Bank's 2015-2016 Strategic Plan ("Strategic Plan") and
    specifically which parts of the Strategic Plan the proposed acquisition would
    facilitate. Also, explain the aforementioned in the context to GS Bank's ongoing
    business plans. Provide a copy of the Strategic Plan.

    believes the "tum-key" nature of the Proposed Transaction is optimal in that we are
    acquiring a functioning technology platform and hiring related personnel experienced in
    its operation, which reduces potential operational risks and costs associated with
    organically building an internet deposit platform.

    DC_LANOI:318965.9

    PUBLIC REDACTED VERSION


    The Proposed Transaction is, therefore, consistent with, and specifically
    facilitates, the Strategic Plan and is intended to strengthen GS Bank's liquidity profile
    with a new, stable and diversifying funding source that can be used to support the
    existing asset strategy and ensure ongoing compliance with LCR requirements.

    2.

    Discuss how GS Bank's level and composition of assets and funding would change
    over the next three years. Provide a table that depicts the asset and funding types
    and respective amounts for years ending in 2016, 2017, and 2018. In addition,
    provide annual balance sheet and income statement projections for 2016,2017, and
    2018.
    The attached projected pro forma annual balance sheet and income statement
    projections for years ending 2016, 2017 and 2018 (Confidential Exhibits Band C) are
    generally consistent with those projections included in our prior submissions, including
    the 2015 Dodd-Frank Act Stress Test ("DFAST") (December 2014), the Strategic Plan
    (March 201 GS Bank's
    ICAAP
    201 and the
    201
    r11JII.I11'-aLl\.111

    The differences between the prior projections and


    those in Confidential Exhibits Band Care a reflection ofGS Bank's actual business
    the end of the third
    of 2015
    as well as updated projections of business
    activity through 2018. Please note that the information in Confidential Exhibits B and C
    has not been audited
    faith

    The Strategic Plan outlined a number of oo1tentm1


    the 2015-2016
    Consistent
    with the trajectory of asset growth outlined in the GS Bank Strategic Plan, the types and
    amounts of projected asset growth now forecasted are reflected in Confidential Exhibit C
    (which, as requested, includes projections beyond the time period of the Strategic Plan).
    Confidential Exhibit C also reflects the projected composition of funding over the
    forecasted period.

    -2DC_LANOI :318965.9

    PUBLIC REDACTED VERSION

    As noted above, the Proposed Transaction will allow GS Bank to strengthen its
    liquidity profile with a new, stable and diversifying source of funding that will be used to
    substitute for other sources of funding, including, but not limited to, funding from its
    parent.

    3.

    Discuss how GS Bank's customer base would change over the next three years.
    GS Bank's direct clients today include corporations, financial institutions,
    investment funds, governments, and high-net-worth individuals, and our third-party
    deposit sweeps and brokered CDs are held

    individual retail customers.

    The Proposed Transaction will result in additional, direct relationships between


    GS Bank and retail customers. As of October 31 2015
    to information
    GE
    See the response to Question 5 for additional
    detail.

    -3DC_LANOI :318965.9

    PUBLIC REDACTED VERSION

    4.

    Provide a description of the general backgrounds, and roles and responsibilities of


    the GE Bank employees to be hired by GS Bank.
    GS Bank has extended employment offers to. GE Bank employees (as of
    October 31, 20 15), in conjunction with and contingent upon the closing of the Proposed
    Transaction. Many of these employees have experience in various areas relating to the
    internet deposit business, including compliance, operations, technology, legal and
    marketing. The functional areas and responsibilities of these employees are outlined
    below.

    Compliance:
    offers have been extended to GE
    Bank employees with primary responsibility for overseeing and executing the
    BSA/AML compliance program, reviewing and implementing policies and
    procedures to ensure compliance with corporate guidelines and regulatory
    requirements, managing and completing compliance risk assessments, fraud
    monitoring, and preparing compliance-related reporting. Other areas of focus
    include analysis of new regulations and necessary program changes and
    development of training programs for employees.

    Operational Support:
    offers have been extended
    to GE Bank employees responsible for operational risk assessment, cash
    management, vendor management, and operations analysis and reporting.

    Technology:
    offers have been extended to GE
    Bank employees who manage the systems and technology that support the
    deposit platform. The transferring employees will oversee and assess
    technology risk, technology infrastructure, and coordinate with crossdivisional teams on technology-related matters.

    -4DC_LANOI :318965.9

    PUBLIC REDACTED VERSION

    Legal:
    with primary responsibility for maintaining current knowledge of various
    federal and state banking regulations, advising management on various
    banking and regulatory matters, assisting with examination issues, application
    and filings matters, enforcement and other day-to-day issues, addressing
    regulatory issues and, in coordination with Compliance, implementing
    regulatory requirements.

    The transferring employees are responsible for overseeing and operating the
    deposit platform of GE Bank, which we view as a well-functioning business with a focus
    on compliance and customer service. We expect that this team, together with the people
    and resources ofGS Group, will combine to effect a smooth transition ofthe platform by
    GS Bank.

    5.

    Indicate the approximate number of retail accounts to be acquired from GE Bank


    and a general description of the types of accounts. Provide an estimated number of
    retail accounts that GS Bank expects to have by year-end 2016,2017, and 2018.
    As of October 31, 2015 (according to information provided by GE Bank), the
    deposit liabilities to be assumed consist of:
    (i)
    Retail online certificates of deposit (the "Retail CDs") with an aggregate
    principal amount of approximately . . billion;
    (ii)
    Retail online savings accounts, with balances of approximately . .
    billion (together with the Retail CDs, the "Retail Deposits"); and
    (iii)
    Brokered certificates of deposit (the "Brokered CDs") with an aggregate
    principal amount of approximately . . billion.
    The Retail Deposits Account holders are natural persons, U.S. residents and over
    the age of 18. Accounts may be individual or joint, but do not include trust or custodial
    accounts.

    The Brokered CDs were distributed by a network of third-party brokers to their


    clients, which typically are retail brokerage clients but may include non-retail. Given the

    -5DC_LANOI:318965.9

    PUBLIC REDACTED VERSION


    CDs are negotiable instruments and clear through DTCC, the number of beneficial
    owners and their identity is not known to GS Bank or GE Bank.

    -6DC_LANO I :318965.9

    PUBLIC REDACTED VERSION


    CONFIDENTIAL EXillBIT A
    [REDACTED]

    DC_LANOI:318965.9

    PUBLIC REDACTED VERSION


    CONFIDENTIAL EXHIBIT B
    [REDACTED]

    DC_LAN01:318965.9

    PUBLIC REDACTED VERSION


    CONFIDENTIAL EXIDBIT C
    [REDACTED]

    DC_LAN01:318965.9

    PUBLIC REDACTED VERSION


    CONFIDENTIAL EXIDBIT D
    [REDACTED]

    DC_LAN01:318965.9

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