Is Marcus Even Human?

Marcus is on a mission!

His goal is to help Goldman Sachs collect an extra $2.5 billion each year from everyday Americans.

That’s in addition to the roughly $40 billion Goldman already pulls in from its various business lines.

So here’s the question… Is Marcus pulling money out of your pocket to hit his $2.5 billion goal?

Goldman Gets Greedy With New Consumer Business

Back when I was a hedge fund manager, it was a status symbol to have an account with Goldman Sachs. They wouldn’t take just anyone’s money.

You essentially have to be someone very important, very wealthy, or both for Goldman Sachs to be willing to do business with you. That’s how the bank has built a reputation for being one of the most elite firms on Wall Street.

Even though my firm managed more than $130 million in assets for our affluent clients, I still had to pull some strings and call in some favors on Wall Street to even start doing business with the firm.

But today, Marcus is changing all of that.

And to be clear, Marcus isn’t actually human.

Marcus is the name for Goldman Sachs’ new consumer banking business which is focused on making money from the Americans that this Blue Chip bank won’t actually deign to be associated with.

Now, “consumer banking” could mean a lot of things. Many consumer banks offer checking accounts, bill pay services, safety deposit boxes and other helpful services. I’m sure Marcus has some of those bells and whistles available for clients.

But Marcus is primarily interested in making loans to individuals and collecting interest payments — big interest payments!

Information on exactly how much business Marcus is doing is hard to come by.

Goldman hasn’t been particularly transparent when reporting information on this particular business unit.

But according to a report from Bloomberg, Marcus generated more than $550 in interest income during the first quarter alone.1

That’s nearly a half billion that individuals across America paid to borrow money from Marcus. And from what I’ve seen, the rates that these Americans are paying aren’t very attractive — to anyone except Marcus.

Over the next three years, Goldman expects Marcus to account for roughly half of the firm’s goal of growing revenue by $5 billion. So you can bet that Marcus will be hard at work, looking for Americans to fleece, er, lend money to over the next few years.

Here’s How to Protect Yourself

Here at The Daily Edge, we usually focus on ways to grow your income from the markets and with other opportunities that we’re seeing.

But in addition to growing your wealth, I also want to make sure that we’re helping you keep the money that you worked so hard to set aside.

That’s why I get so upset when I see banks trying to gouge you.

I’ve received some personalized “invitations” from Marcus to open up lines of credit. I can’t be sure, but I think I even saw a Marcus credit card offer addressed to my teenage son. Of course the envelope stated that this offer was to help him “build his credit.”

You and I know that the real goal is to teach him to be in debt as early as possible.

If you’re getting invitations from Marcus, or any other personal lender, I would urge you to be very careful before you take the loan.

Most of the time, these solicitations are skewed heavily in favor of the bank. The interest rates that they charge are exorbitant, and carry stiff penalties for missing any payments. Regardless of the banks intentions, it’s simply not a wise financial option for you to take.

For most of us, cutting back on spending and looking for creative ways to earn a bit of extra income is a far cry better than signing up for a personal loan or credit card.

And if you do need to get a short-term loan to pay for an emergency or bridge a financial gap, you’re likely to get a much better loan by going to your local credit union or community bank.

As an investor, I love the big banks. They’re making money from many different sources including some very legitimate trading and investment banking activities.

But as a consumer, I really hate to see Goldman trying to step in to the consumer lending business in a way that will likely over-charge individuals for their loans.

If you’re looking for a strong financial stock, Goldman Sachs (GS) is a decent option for your portfolio. But if you’re looking for a consumer loan, steer clear of Marcus.

Here’s to growing and protecting your wealth!

Zach Scheidt

Zach Scheidt
Editor, The Daily Edge
TwitterFacebook ❘ Email

1Goldman’s Good Trading Quarter Complicates Its Future, Bloomberg

The Daily Reckoning