Goldman Mulls Online Bank, Open to Deals

Goldman Sachs is considering launching an Internet bank and has not ruled out acquiring consumer banks, people familiar with the situation said.

In September Goldman converted from an investment bank to a bank holding company to soothe worries about its access to funds during the credit crunch, Through an online unit, it would seek deposits that could be used to fund corporate and real estate lending businesses and support its capital markets activities.

Goldman, which on Friday won approval for a New York state bank charter, also will name veteran banker Gerald Corrigan as chairman of its banking subsidiary, Goldman Sachs Bank USA, the sources said. Corrigan is a former president of the Federal Reserve Bank of New York and is known in financial circles around the world as an authority on counterparty risk.

Goldman declined to comment on the matters.

For much of the past decade, big banks such as ING Group and HSBC Holdings have used online units to soak up deposits in the United States and other markets at a much lower cost than if they ran branch networks.

As market panic in September forced Lehman Brothers into bankruptcy and spurred Merrill Lynch to sell itself to Bank of America , Goldman and Morgan Stanley abandoned their broker-dealer models to become bank holding companies under the watchful eye of the Federal Reserve.

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Conversion to a bank meant these securities firms could acquire deposit-gathering banks and enjoy permanent access to low-cost Fed funds.

While Morgan Stanley executives say they intend to expand on their firm's significant retail brokerage business with consumer bank acquisitions, creating a fourth primary business line, Goldman has insisted that it will not change its strategy of catering to companies and institutional investors.

Goldman currently has no plans to acquire a bank with substantial retail operations, the sources said, but it has not ruled out such a purchase in the future.

Chief Executive Lloyd Blankfein recently said Goldman intended to gather more deposits, as a way to reduce its reliance on short-term debt funding, through a number of channels.

Options include seeking deposits from the firm's private wealth management business, from large corporate clients, and purchasing deposits from wholesale markets. Goldman may also acquire deposits from failed banks seized by the FDIC in the past year.

An online bank, if launched, would sell certificates of deposit and other savings products. Branding and other operational details have not yet been decided, the sources said.

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