Wall Street Firms Brace for Seismic Changes

[TomCADem]

Source: Wall Street Journal

The Senate version of financial regulation hits Wall Street harder than expected, with some analysts estimating it could cut the profits of major financial institutions by roughly 20%.

Critics of a comparable bill that passed the House in December said the Senate version has fewer escape routes and exceptions that leave room for Wall Street firms to work around new restrictions on their riskiest activities.

* * *
The most important set of changes relate to derivatives, which are contracts with prices tied to other market instruments. While the House bill required some derivatives to be cleared to reduce the risk of nonpayment, the Senate version could force Wall Street firms to keep derivatives separate from their bank units—or even spin them off entirely.

* * *

The legislation could cut derivatives-related revenue by 30% to 50%, according to Mr. Moszkowski. Had that occurred in this year's first quarter without any offsetting declines in fixed expenses or capital, per-share earnings at J.P. Morgan, Goldman Sachs and Morgan Stanley would have been at least 16% smaller than what the three companies reported. Citigroup Inc.'s profit per share would have shrunk by 7%.


Read more: http://online.wsj.com/article/SB10001424052748703559004575256983028632328.html?mod=WSJ_latestheadlines

---

Brace yourself for two competing sets of conflicting talking points from conservatives and libertarians:

1. The bill is government takeover, which shows Obama's socialist agenda. Look at the stock market. It is falling due to fear of regulatory overreach. Ignore what is going on in Europe. It is all Obama's fault.
2. The so-called industry opposition is an elaborate conspiracy to pass a bill that benefits the banking industry. The U.S. Chamber of Commerce opposes it, which means that they really support it. The unions that support the bill are simply suckers. Any attempt at government regulation is bound to fail, because government is inherently corrupt, so why try?

[tridim]

1. FDL will be right there with the regressives offering additional BS talking points.

[ezmerelda39]

2. The Stock Market

is manipulated, things that used to affect it do not even cause a tickle, like high unemployment factors. When Wall Street whines about their profits taking a dive perhaps they should talk to a few folks, or rather a lot of folks whose retirement funds and saving took a jump off from a cliff from Wall Street's own Funny Money Maneuvers. Sort of levels the playing field to have Wall Street whining for a change.

[laughingliberal]

3. Oh, I expect to see all kinds of talking points for dumbing down the Senate bill in conference.

And they won't all be coming from conservatives or libertarians. Melissa Bean (of the New Democrat coalition) led the effort to riddle important safeguards with loopholes so only a few companies will be subject to them. For once, the Senate actually passed a stronger bill.

Of course, it's possible we won't hear much of anything. They may just quietly take most of the teeth out of it, pass it, and claim a win. We need to demand transparency for the House/Senate conference.

[glitch]

7. +about 14 trillion. nt

[Soylent Brice]

4. says the Wall Street Journal. or in other words:

waaaaaaaaaaaaaaaaaahhhhhh!!!!

[Evasporque]

5. New Improved Banksters! Now with 20% less profit from fraud and bilking!...nt

[Hubert Flottz]

6. Source: King Rupert

[Mr. Sparkle]

8. wow 20% .. How will the little darlings cope?

Tough times ahead for Wall street, its time they pulled their socks up. /sarcasm

I hope Barney is right when he says it empowers regulators as this would be the best part of the bill.

[Daemonaquila]

9. Sounds great to me!

Though considering the hit that people's home equity, retirement accounts, etc. took, calling a 20% drop for the banks "seismic" takes a lot of gall. If we cut the derivatives-related revenue by 100%, then we'd really be getting somewhere.

[JackRiddler]

10. Such primadonnas - it doesn't even go back to the regulation of 11 years ago.