The growth of loans has slowed down in banks on Wall Street, except among very wealthy clients who are increasingly taking loans that they do not need. At Goldman Sachs, client loans increased by $12 billion, or 43% compared to last year.
In addition to Goldman Sachs, GS Select, which provides secured loans for clients of independent financial advisors, is also reporting profits. For 2020, loans are counted in amounts exceeding $8 billion. Loans at GS Select, ranging from $250,000 to $25 million, can be used for everything except purchasing stocks. About half of the loans are used for real estate. A good way to use these loans in the real estate market is also to counter cash offers from other clients.
At Morgan Stanley, wealthy clients are using loans to pay capital gains taxes on stock exchanges. Securities loans for Morgan Stanley have nearly reached $76 billion, which is 43% more than last year. Lending has also increased due to low interest rates and the overall pandemic situation.
Low interest rates will not remain constant; however, loans and mortgages will continue to be in trend. Taking loans is more attractive than selling stocks and paying capital gains taxes. Even if interest rates rise, loans will still be attractive if the Biden administration succeeds in doubling capital gains taxes.
The increase in lending is one of the reasons why banks are expanding their wealth management services, and the industry is expected to reach $73.3 trillion in assets by 2025. Should there be drastic increases in property and capital gains taxes, American billionaires will turn to advisors and find ways to reduce their tax liabilities.
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