It's true. Starting sometime next year, Goldman Sachs Group Inc. (NYSE: GS) – the poster child Wall Street investment bank of the 1% of the 1% of the superrich – is going to lend money to the remaining 99% of consumer borrowers.
Don't bother getting all suited up with hat in hand for a visit to a local branch of Goldman Sachs Bank USA (with its $73 billion in deposits) – there won't be one.
And don't even think about walking into the bank's office at 200 West Street in New York City – you won't get past security.
However, with Goldman's new lending strategy, that walk-in access won't be required.
Goldman Sachs, you see, is getting into online banking.
This new venue of borrowing was known as P2P, or peer-to-peer lending – until big money transformed the P2P moniker into "power-to-profit."
And as we've been predicting for some time, P2P lending is creating a big moneymaking opportunity for you…
We Predicted This
I told you about P2P here back in April and explained how the original peer-to-peer model was being papered over by institutional money and banks getting into the game. I also showed you several great ways to profit.
Just to remind you, in the peer-to-peer arena, little folks make loans to other little folks through an intermediary site like LendingClub Corp. (NYSE: LC).
Borrowers seeking money to consolidate credit card debt, pay for a home renovation, or pay for school can be funded by creditors like you and me who have some cash to lend and want to collect a higher interest rate than we can get anywhere else.
Of course, as lenders, we'd face "repayment risk."
And that's where institutions stepped in – in a big, big way.
All Knowing… and All Powerful
If you or I fund a personal loan and we get stiffed, we're going to feel the sting. One way to not feel it so much is to have a lot of money to lend, to make lots of loans, and to be diversified across a wide spectrum of borrowers. That way, the high interest rates you earn as a lender – across a large loan book – will tend to offset a small-but-expected number of defaults… generating a still-high rate of return on your investment.
Goldman Sachs knows that. More importantly, Goldman knows how to assess risk – and is even creating newfangled models that are designed to calculate all the risks of this new lending market. It also has access to enough money to make billions of dollars in new consumer loans. And it has access to the technology needed to create lending platforms in cyberspace.
Add all this together and it's clear Goldman Sachs believes it has the muscle to become a serious player in the consumer lending business.
Make no mistake: This isn't a kinder, gentler Goldman Sachs bending over backward to help little borrowers.
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.