That Goldman Sachs feels it must write to the Federal Accounting Standards Board (FASB) to ask that it consider making banks mark loans to market is telling. It's the clearest signal yet that the pure investment banks are, finally, concerned at the potential which lurks within the large commercial and universal banks.
The latter have been a threat for several years now, but only in recent months has it become truly worrisome. That is, in part, due to consolidation. Citigroup, JP Morgan Chase, Bank of America, Deutsche Bank, even CSFB with the addition of DLJ's top-notch leveraged finance team, now all offer a wide range of credit products, with a balance sheet to back it up.
Another reason is that only in the past year has the extension of credit in whatever format - loans, bonds, commercial paper - returned to the centre stage of the investment-banking business as a result of the stock markets crash and consequent drop in M&A and equities transactions. And pure debt houses are proving that the traditional view of credit as a less profitable business than equities and M&A is no longer valid; Barclays Capital, for example, brings in over 20% return on capital.