One of the first casualties of financial reform and its restrictions on banks’ ownership of private equity and hedge funds may soon take place at Goldman Sachs (NYSE:GS) as senior executives there begin serious discussions about spinning off at least a piece of the firm’s massive private equity arm, FOX Business has learned.

The internal discussions at Goldman are more than just theoretical, according to a senior Wall Street investment banker with direct knowledge of the matter. Senior executives at Goldman are worried that the mandates of financial reform, namely the so-called Volcker Rule, which severely limits how much a bank can invest in such funds, will create enormous uncertainty and prod investors to flee their investments, or prevent the firm from raising money in the future, this person said.

For that reason, Goldman is now weighing whether it should spin off part or all of its private equity arm into a separate public company.

A Goldman Sachs spokesman would neither confirm nor deny the matter.

Goldman does not publicly release the market value of its private equity division, but according to securities filings the firm has raised $82 billion in private equity funds, including $11.5 billion from its executives from the firm itself, or 14% of the money raised. That internal money presents a problem for Goldman; under the Volcker Rule, named after president Obama’ economic adviser Paul Volcker, firms cannot have more that 3% of their own money in such funds. Goldman’s total investment, according to people with knowledge of the matter, is much closer to 30% when market appreciation is counted.

People inside Goldman say nothing is imminent; under the Volcker Rule, they will have a period of time to spin out such assets, anywhere between five to seven years, people inside the firm believe.

That said, the uncertainty surrounding the future of the business has senior executives inside the firm, including CEO Lloyd Blankfein, worried enough that the spin-off option is being strongly considered. By selling part of the business public, for instance, Goldman can reduce its stake to meet the mandates of the Volcker Rule, these people say.

Nor will Goldman be the first bank to sell its private equity business. Bank of America (NYSE:BAC) announced today a spin out of one small fund, and Morgan Stanley (NYSE:MS) is considering a similar move.

“Unless the rules change Goldman knows it will have to have a declining investment in its private equity business,” said one analyst.