The US Federal Reserve is said to be investigating Goldman Sachs (NYSE:GS) and their consumer operations – specifically consumer lending, according to a report.
The news follows a difficult earnings report by Goldman that is being described as its worse earnings miss in a decade. Goldman’s results whiffed analyst expectations dramatically, causing shares to tank.
According to WSJ.com, the Fed is concerned that Goldman did not have proper controls in place for consumers who used its digital bank, Marcus. Citing “people with knowledge of the matter,” the article claims the regulator is reviewing if Marcus has “governance problems” or “what happened in instances of customer harm.”
CI is unaware of any outside claims of consumer harm for Goldman’s digital bank Marcus and an investigation is not necessarily an indicator of any action by the Fed.
During the earnings call, Goldman CEO David Solomon defended his firm’s push into digital banking services, adding that they tried to do too much too quickly while admitting they struggled with finding appropriate talent.
At one point, Goldman’s strategy of capitalizing on its extensive experience in markets, banking, and wealth management was viewed as a way to leverage technology to provide these services to the masses. Goldman has now announced it is scaling back consumer offerings, halting lending on Marcus, and focusing more on wealth management.
A reorganization of the firm, announced last year, separated its Fintech as a Service business into “Platform Solutions,” where Goldman’s technology powers other platforms’ financial services – like Apple’s (NASDAQ:AAPL) successful Apple Card. Its digital bank Marcus now falls under Asset and Wealth Management. While losing money, Goldman’s Platform Solutions division is the one segment of the bank that delivered growth in 2022.