Source:
Wall Street JournalThe 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?