Tuesday, October 11, 2011
I predict there will be a lot of talk about Wall Street. Toward that end, I commend four items from this afternoon.
If the so-called "Volcker Rule" is implemented unchanged from a draft that was leaked last week, it would be negative for bondholders of Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase, and Morgan Stanley, Moody's Investors Service Inc. said Monday.
All these banks have substantial market making operations, and the compliance and reporting burdens that the rule, part of the Dodd-Frank Act, would impose, and uncertainties in how it would be applied "are likely to diminish the flexibility and profitability of banks' valuable market-making operations and place them at a competitive disadvantage," Moody's said.
While the Volcker Rule's restrictions on true proprietary trading, hedge fund and private equity investing by banks are positive for bondholders, its "complex restrictions on market-making and hedging" are "credit negative," Moody's analyst Peter Nerby said a note published Monday.
U.S. regulators are seeking comment on proposed rules that would bar deposit-taking banks from engaging in proprietary trading for their own accounts and from owning or sponsoring hedge funds or private-equity funds.
The New York state comptroller expects Wall Street to lose 10,000 jobs by the end of 2012.
The job losses are projected to occur in New York City's securities industry from now through December, 2012, according to Eric Sumberg, press spokesman for state comptroller Thomas DiNapoli.
"It now seems likely that profits will fall sharply, job losses will continue, and bonuses will be smaller than last year," DiNapoli said in a press release. "These developments will have a rippling effect through the economy and adversely impact state and city tax collections."
Goldman Layoffs May Be Only Path to Profit
Not saying the regulation isn't necessary. Only that it comes at a cost.
Release the hounds.