Goldman Sachs consumer business Markus faces Fed probe: report

The Federal Reserve is investigating Goldman Sachs’ consumer business to determine whether the bank had proper safeguards in place when it ramped up lending, the Wall Street Journal reported Friday, citing people familiar with the matter.

Investment bank shares fell almost 3%.

The central bank is concerned that the Wall Street giant didn’t have proper monitoring and control systems inside Marcus’s consumer division as it grew, the report said.

The investigation, which grew from a standard Fed business review in 2021 and escalated into an investigation last year, is also examining cases of customer harm and whether they were properly resolved, the report says.

“The Federal Reserve is our primary federal banking regulator and we do not comment on the accuracy or inaccuracy of matters relating to discussions with them,” a Goldman spokesman told Reuters.

In September, Bloomberg News reported that the Marcus division was under consideration by the Fed.

The investigation will add to the problems of Goldman, which is making a strategic turnaround that includes refocusing on its core trading and investment banking business after losing money in its customer service venture.

“Another investigation into consumer business makes Goldman’s foray into the consumer market even worse and could undermine management’s credibility, especially with so many claims about GS’s ability to manage risk and build best-in-class platforms,” ​​said Mike Mayo, banking analyst. in Wells Fargo, in a note.

“The investigation, along with poor disclosure and other regulatory investigations, will increase the risk associated with GS ownership and cost of capital.”

The Consumer Financial Protection Bureau is also investigating Goldman’s credit card activities, the bank said last year.