Issue of the week: Has Washington defeated Wall Street?

The Dodd-Frank Act forced banks to sell off “many of their classic ‘Wall Street’ businesses. How are the banks doing?

The war on Wall Street is over, “and Washington won in a blowout,” said Ben White in The Dodd-Frank Act has forced banks like Citigroup and Bank of America to sell off “many of their classic ‘Wall Street’ businesses, including proprietary trading desks and private equity and hedge fund stakes.” Goldman Sachs has become “a shell of its former self,” and JPMorgan Chase, “once viewed as the only bank to come through the crisis largely unchanged,” has had to fork over some $20 billion in settlements “for its sins.” While “none of these banks are going broke anytime soon,” Washington’s regulations are forcing them to cut costs and slash bonuses. Bank reformers may not yet be satisfied, but “Wall Street is struggling to make money.”

That’s just what they want you think, said Michael Hiltzik in the Los Angeles Times. “The truth is that the financial sector still wields excessive control over the economy, the big players have grown even bigger, and the regulators have been systematically emasculated.” JPMorgan’s profit—$17.9 billion for 2013—may be down 16 percent from 2012, but that’s “still, shall we say, copious.” And making banks pay billions in penalties for bad behavior “is the antithesis of effective regulation: It leaves the wrongdoers in place, primed to find new markets to game.” Let’s not be naïve: Today’s regulations appear successful only because the banks’ former playground of mortgage securitization has “been played out.” The real question is whether the new rules can “prevent a recurrence in a different market.” Don’t bet on it. The regulator “cats are always a few steps behind the Wall Street mice.”

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