The media is talking to you, Wall Street. Consider it a piece of New Year’s advice from the editors watching the state of your union.Their message is this: Like it or not, regulation is coming. And the worst thing about it, is what Wall Street looks like trying to stop it.
As of the first day of 2012, Bloomberg pointed out, Wall Street’s fear of Dodd-Frank is far larger than the regulations actual impact. “Only 74 of the 400 required rules had been finalised, and 154 had missed the law’s deadlines,” they wrote.
But the hand-wringing continues, so the editors at Bloomberg tried to gently hold Wall Street’s hand and calm it down. They read Dodd-Frank and broke it down into 3 easy to understand levels.
- The first level makes Wall Street more transparent and less risky forcing banks to disclose more information.
- The second involves the higher capital requirements that have CEOs like Jamie Dimon pacing in their bedrooms at night.
- And the last level is what would happen in another worst-case 2008 scenario. If a big bank fails, the FDIC will take it over to put it to pasture gently while avoiding its contagion to other institutions.
Is that really all that bad? According to the Bank of England “even if capital levels were more than doubled, the economic benefit of averting financial crises would outweigh any costs that might arise,” says Bloomberg. And the Volcker Rule’s regulation on proprietary trading “would be only $50 million a year, because banks already do most of it… Compared with the estimated $15.8 billion the top six U.S. banks lost on proprietary trading during the last crisis…”
“The solution is not to repeal Dodd-Frank. It is to construct its containment system as quickly as possible,” they continued.
That was gentle. The New York Times’ editorial was not so: “Wall Street Meets Reality,” said a piece published last week.
Yes, it conceded, new regulations are hurting bank profitability, but that’s a sign that they’re working by curbing excessive risk caused by “destructive products.”
And look Wall Street, even your friend Michael Bloomberg is starting to cave. He recently endorsed a higher tax on private equity partners. Plus, he’s supporting Cornell’s new tech campus in NYC because now the kids don’t want to work for Goldman — they want to work for tech start-ups and social media companies.
And as Andrew Ross Sorkin pointed out in his last column of 2011, all of this only looks worse when Wall Street goes kicking and screaming. Take the Consumer Financial Protection Bureau and all the push-back it’s getting from Wall Street’s supporters in Congress, for instance:
Whether either was the right person for the post is almost irrelevant. What’s clear is that Wall Street is doing everything it can to keep the agency from being able to do its job, and that’s a shame.
Even if you think the financial industry is over regulated or you don’t like the agency’s governance structure, all this political manoeuvring sends an awful message to the public: Wall Street banks are actively trying to stymie a start-up agency charged with protecting consumers’ money.
It’s a new year, it’s a new Wall Street. But that doesn’t mean everything has to go down in flames: That is, unless Wall Street douses itself in gasoline and lights a match.