The Federal Reserve is investigating
Goldman Sachs Group Inc.’s
consumer business to determine whether the bank had appropriate safeguards in place as it ramped up lending, according to people familiar with the matter.
The regulator has concerns that the bank didn’t have proper monitoring and control systems inside the consumer business, known as Marcus, especially as it grew larger, the people said.
The Fed is looking into whether Goldman has exercised appropriate oversight over Marcus and whether it has management or governance problems, according to people familiar with the matter. The regulator is also examining what happened in instances of customer harm, including whether issues were flagged internally and, if they were, whether they were properly resolved, they said.
The probe encompasses Goldman’s compliance functions, as well as audit and legal, some of the people said.
Bloomberg News previously reported that the Fed was reviewing Goldman’s consumer business.
The investigation is another setback for Goldman’s beleaguered mass-market banking operation, launched to much fanfare in 2016 with a high-yield savings account and personal loans. The move into a consumer-banking business dominated by larger rivals like
& Co. and
Bank of America Corp.
was a big strategic shift for a bank better known for advising the rich and powerful.
A splashy credit-card partnership with
Apple Inc.
came a few years later. Goldman invested billions of dollars in Marcus, which was named after the bank’s founder. But it struggled to bulk up the credit-card business. A long-awaited checking account never materialized.
Goldman is now scaling back the consumer operation as part of a broader reshuffling of its businesses. The bank is discontinuing personal loans and has scrapped plans to offer a checking account broadly.
“We tried to do too much too quickly,” Chief Executive
David Solomon
said of the consumer business on a call with analysts earlier this week.
Much of Marcus is being folded into Goldman’s new asset- and wealth-management unit. Some pieces, including its credit-card partnerships with Apple and
General Motors Co.
, as well as specialty lender GreenSky, are moving into a new unit called Platform Solutions.
That business racked up steep losses—more than $3 billion since 2020. The Fed investigation and related issues could lead to additional costs.
The probe grew out of a standard Fed review of Goldman’s consumer business, which started in 2021, people familiar with the matter said. It intensified to an investigation last year, they said.
The Fed investigation is occurring at the same time as a Consumer Financial Protection Bureau probe of Goldman’s credit-card business. Goldman disclosed last summer that the CFPB is investigating its credit-card account management practices, including how the bank resolves bill errors, refunds cardholders and advertises its cards.
The two agencies are sharing information, people familiar with the matter said.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and David Benoit at David.Benoit@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
