A Politico piece by Ben White claimed just this and met with incredulity. In part this is understandable as Matt Yglesias points out. After all, saying that D-F is working great can be just a way of not getting any more regulation.
"Now, look, I get the political gamesmanship here. After spending 2009 and 2010 fighting tooth and nail against the passage of the Dodd-Frank bill, then spending 2011 trying to halt its implementation, then spending 2012 trying to elect Mitt Romney and a GOP Senate that would repeal the bill, then spending 2013 again trying to halt its implementation, the financial services lobby has suddenly started proclaiming that Dodd-Frank is working great. And it's no mystery why. They fear the passage of some sort of legislation to cap bank size, they fear Federal Reserve implementation of stricter capital requirements, and they fear the political push to see more criminal indictments in future cases regarding bank misconduct."
http://www.slate.com/blogs/moneybox/2014/01/17/wall_street_profits_down_after_dodd_frank_things_really_have_changed.html
Nevertheless much of what we're seeing does look impressive.
"In 2009, Washington went to war against big Wall Street banks hoping to blow up the kind of high-risk, high-reward strategies that helped spark the financial crisis. Five years later, that war is largely over. And Washington won in a blowout."
"Now, look, I get the political gamesmanship here. After spending 2009 and 2010 fighting tooth and nail against the passage of the Dodd-Frank bill, then spending 2011 trying to halt its implementation, then spending 2012 trying to elect Mitt Romney and a GOP Senate that would repeal the bill, then spending 2013 again trying to halt its implementation, the financial services lobby has suddenly started proclaiming that Dodd-Frank is working great. And it's no mystery why. They fear the passage of some sort of legislation to cap bank size, they fear Federal Reserve implementation of stricter capital requirements, and they fear the political push to see more criminal indictments in future cases regarding bank misconduct."
http://www.slate.com/blogs/moneybox/2014/01/17/wall_street_profits_down_after_dodd_frank_things_really_have_changed.html
Nevertheless much of what we're seeing does look impressive.
"In 2009, Washington went to war against big Wall Street banks hoping to blow up the kind of high-risk, high-reward strategies that helped spark the financial crisis. Five years later, that war is largely over. And Washington won in a blowout."
"You might not know it given continued demands from Democrats — and even some Republicans — to further bust up the nation’s largest banks. And the standard media refrain is that Wall Street titans always win, no big bank bosses went to jail and the industry will just find new ways to keep the casino open."
"But the truth on the ground — at least at this moment in time — is very different."
"Washington’s big victory came via widespread public outrage at the financial industry, which paved the way for a strong reform bill. And after President Barack Obama signed Dodd-Frank into law in 2010, the industry made mistake after mistake — from the interest rate rigging scandal to mortgage-foreclosure “robo-signing” — making it essentially impossible for the industry’s lobbyists to beat back any of the newly imposed regulations."
"“The scope of activities that U.S. banks engage in has been dramatically reduced,” said Mohamed A. El-Erian, chief executive of giant bond fund manager Pimco, which itself may face new restrictions as regulators turn their attention to the asset management industry. “Even in a period when markets are performing well, the numbers the banks are pulling in are just nowhere near as strong as they once were.”
"The transformation of Wall Street is so complete that even some of the industry’s loudest critics — rarely willing to give an inch — are prepared to declare at least partial victory, albeit with plenty of “time will tell” caveats and complaints about the industry pushing to underfund its regulators in the latest spending bill working its way through Congress."
“There is no question that many of the highest-risk activities, which happened to be the most profitable activities for Wall Street, are now at least reduced and often totally gone,” said Dennis Kelleher, chief executive of Better Markets, one of the most vocal pro-regulatory reform groups. “They’ve had to exit hedge funds and private equity funds and they sold off any business with ‘proprietary trading’ on the door.”
While the profits of the banks is down part of this is because of the shaky economy and the time they have to spend restructuring into less risky operations.
"To be sure, some of the drop in trading and other revenue at big Wall Street banks reflects a slower economy and less risk-taking by corporate clients. But it also reflects the fact that under Dodd-Frank, the Volcker rule and new capital requirements instituted by the Federal Reserve and other regulators, Wall Street banks cannot trade for their own accounts the way they once did, must maintain much less risky balance sheets and for the most part can no longer sell exotic and high-return products such as collateralized debt or loan obligations."
“There are only two banks beating their cost of capital right now, JPMorgan and Goldman Sachs, and neither are beating it by much,” said Brad Hintz, a banking analyst at Sanford Bernstein and a former top executive at Morgan Stanley and Lehman Brothers. He was referring to how much it costs a bank to make money for shareholders. “New regulations are pushing down the performance of the banks. At some point they will get restructured, but right now they are in a major period of transition.”
Read more: http://www.politico.com/story/2014/01/how-washington-beat-big-wall-street-banks-102254_Page2.html#ixzz2qr4quGE3
Read more: http://www.politico.com/story/2014/01/how-washington-beat-big-wall-street-banks-102254_Page2.html#ixzz2qr4quGE3
The goal isn't really to kill bank profits but to make sure that they don't blowup the economy again through TBTF. There are some signs of optimism for some bankers out there.
"Loans to businesses have risen to a record high and bank executives say they are increasingly optimistic about the U.S. economy."
"Increasing demand for bank loans often is a prelude to higher economic growth. With the U.S. government budget crisis fixed for now and Europe showing signs of economic recovery, companies feel more comfortable borrowing to invest in machinery, factories, and buildings."
"JP Morgan Chase & Co Chief Executive Jamie Dimon, who has long described himself as "cautiously optimistic" about the economy, recently dropped the modifier "cautiously," he said on a conference call with investors last week."
"We're using the word optimistic because we are actually optimistic," he added.
"The sun and moon and stars are lined up for a very successful year" in the U.S., he said the next day at a conference in San Francisco.
"I don't see any weak spots in America," Dimon said, noting that corporations, small business, the stock market and the U.S. housing market are all showing signs of improving.
No weak sports. Sounds good. Perhaps 2014-2015 will be great years in America. Let's hope so. Guess he's not worried about Obamacare (!).
No comments:
Post a Comment