In the heady and panicked months following the financial crash of 2008, the US government bailed out a handful of the United States’ biggest financial institutions. Among those were the investment banks Goldman Sachs and Morgan Stanley, which together received bailouts and loans totaling over $100 billion.
Among the terms of the bailout was that they both become bank holding companies, which meant they had the authority to own banks. While this may seem like an expansion of influence, the move has actually placed the previously independent investment banks under new regulation and supervision. It also opened the door for the companies to enter further into consumer lending than they could have as traditional investment banks.
This summer, news broke that Goldman Sachs would be taking advantage of its “bank holding company” designation to branch into the online loan market. According to The New York Times, which reported the story on June 15, the bank will be moving to offer loans of a few thousand dollars through a yet-to-be-launched online portal.
The consumer base will be significantly different the bank’s usual clientele – “the powerful and privileged,” as The New York Times called them.
But offering lower-cost loans to a broader group of people may not be as far from Goldman’s usual dealings as it seems at first. In fact, some loan industry advocates say online loans can often be predatory and underregulated – just like the pre-2008 housing market.
“Goldman was one of the prime movers behind the selling of mortgage-backed securities,” said Liz Ryan Murray, policy director for National People’s Action, a network of local organizing groups that are running a campaign against predatory lending.