Goldman takeover of GE Capital online unit approved

[WASHINGTON] The Federal Reserve approved on Monday Goldman Sachs's takeover of the online deposit platform of GE Capital, rejecting worries it would reduce competition and make Goldman even more powerful.

Approval of the deal announced last August will bring Goldman Sachs Bank US$17 billion in deposits, from GE Capital Bank's total US$18.2 billion in deposits.

It will also bring the Wall Street giant the technology to manage the online deposit-taking platform, currently run out of GE Capital Bank's single office in Holladay, Utah.

Critics of the deal had said it would simply enlarge a bank already labeled systemically important, or "too big to fail".

Others said it would reduce competition in the US banking industry.

But the Fed said the addition of the large deposit base will strengthen Goldman Sachs Bank, which currently reports US$78.1 billion in deposits against assets of US$860 billion.

"As a result, the proposal would immediately improve the stability of GS Bank's funding profile by diversifying sources of funding and increasing stable funding," the Fed said.

"This should enhance financial stability." In addition, with the two banks not competing directly in any market, the Fed and the Department of Justice, which governs antitrust matters, said the deal "would not likely have a significantly adverse effect on competition in any relevant banking market."

The deal is a result of industrial giant General Electric's effort announced last year to sell off most of its US$200 billion GE Capital finance arm.

AFP