How Reform Is a Big Win for the Street (Part 1 of 2)

Eddie Braverman
Rank: The Pro | banana points 20,807

That which does not kill us only makes us stronger.

Lately there's been a lot of hand-wringing on this site about the inevitable regulatory reforms that are coming down the pike. The almost universal opinion is that reforming and/or restricting certain markets or practices will be the death of the industry. What I don't think people are yet realizing is that the sort of reforms that have been proposed would only make Wall Street leaner and more efficient, and potentially restore those working on Wall Street to some level of prestige instead of the punch line status bankers enjoy today.

Very simply, financial reform is essential to the continued success of the banking sector, specifically the investment banking sector. The reforms put in place under the Securities Exchange Act of 1934 were among the central reasons the U.S. enjoyed increased investment and unparalleled growth over the following six decades. The systematic repeal of many of the most common sense tenets of the Act in the late 90's brought us to the brink of economic extinction in 2008.

We all know shit got out of hand. And in the irrational exuberance that led to the collapse, many bright young men and women were enchanted by the siren song of easy money and ran their otherwise promising futures aground on the shoals of Wall Street. Rather than being repulsed by the greed and excess, they flocked to it. (I'm no different, by the way, so don't think I'm going all "Holier than thou" on you. It was all about the money for me, and never about anything else.)

If you're still wondering why reform is necessary, I'll let my good pal A.J. explain it to you:

If you work on Wall Street and that video makes you recoil in horror, chances are you belong there. If, however, the video makes you think about the good old days and sends you into a mental debate on the benefits of fake-a-bake vs. spray-on tan, then you're a pretender and you probably should have done something else with your life. Fear not: the coming regulatory reforms will ferret you out and you'll be shown the door soon enough.

The funny thing is, the average investment banking analyst would be good at almost anything else. The brains and tenacity required to get hired on the Street would benefit a wide array of other industries of arguably higher social utility than banking.

We've already begun to see the natural selection process in analyst comp. First years in 2007 pulled in around $150,000 all-in; today that number is closer to $100,000. I don't expect this trend to reverse itself. If anything, I see entry-level banking paying even less in the future (post-reform, obviously). The benefit to that is that there will be fewer analysts who are there just for the money, and more who really want to be there.

Tomorrow I'll go into some macro arguments in favor of reform (from Wall Street's perspective), but in the meantime I'd like you to consider that the sky isn't falling, Wall Street isn't going away and, as I said in the beginning, that which doesn't kill us only makes us stronger. The key is to position yourself in such a way as to attain maximum benefit from the coming reform. That might even include showing yourself the door if you know you don't belong there. Something to think about.

Comments (44)

Apr 28, 2010

Interesting post. I think the panic over financial reform has been waay overdone, but I do have a few comments:

Very simply, financial reform is essential to the continued success of the banking sector, specifically the investment banking sector. The reforms put in place under the Securities Exchange Act of 1934 were among the central reasons the U.S. enjoyed increased investment and unparalleled growth over the following six decades.

There's not a whole lot of basis for this view. Much of the reason that banking enjoyed unparalleled growth from the '30s to the '90s was a booming postwar economy and later (when things got really big) the consumer economy of the '80s. Glass-Steagall and the regulators may have ultimately helped prevent a financial crash ala 2008 after the Penn Central default and the oil crisis, but it didn't cause the banking sector to grow faster.

If anything, some of the deregulation that happened in the late '70s and early '80s- like the Depository Institution Deregulation Act of 1980- helped turn banking- and ultimately money management- from a sleepy business into the booming industry it became by the mid-80s.

The systematic repeal of many of the most common sense tenets of the Act in the late 90's brought us to the brink of economic extinction in 2008.

Absolutely. There need to be greater controls on institutions that the economy will need the feds to bail out if they begin to fail- particularly when it comes to their balance sheets and how they engage in proprietary trading. There also needs to be more disclosure.

If we go back to the 1980s and 1990s model of banking- where banks are allowed to invent new products but can't take crazy risks, we won't kill the industry- we might cut annualized GDP growth by 0.2-0.3%, but we won't kill the industry and cut GDP growth by more like 1% in the process. If we go back to '70s regulation, though, we can expect a '70s banking sector and ultimately a '70s economy.

We've already begun to see the natural selection process in analyst comp. First years in 2007 pulled in around $150,000 all-in; today that number is closer to $100,000. I don't expect this trend to reverse itself. If anything, I see entry-level banking paying even less in the future (post-reform, obviously). The benefit to that is that there will be fewer analysts who are there just for the money, and more who really want to be there.

Can't comment on the numbers, but some reductions in comp would be healthy if it meant a reduction in schedules. I really don't think it makes sense for a 22-year-old- or anyone- to work 90 hours a week. Maybe 70 hours is a healthier schedule for folks.

Not sure if it's good to keep people out who are just there for the money. I think it's important to have long-term greed in banking (other people call it "stewardship", but I'm a cynic). It's definitely important, though, to keep people out who are looking to make money in the short term, who are in it for the "prestige", or who would enjoy working in a different industry and be more successful there.

Apr 28, 2010

OK, seriously... No 1st year makes enough cash to have even the shittiest porsche, which our boy AJ has, and then be able to throw down for Dom P, classless bitches, and $200 champagne flutes of bullshit. Regardless if its 150 or 100 you make, I don't see how either could cut it in Manhattan. The city rapes your FCF.

Maybe AJ lives in Jersey, commutes with that 2 seater shit mobile to work, and if you add up his credit card debt it greatly surpasses his minuscule bank account since paychecks go straight to models and botels.

Apr 29, 2010
rocknrolla:

OK, seriously... No 1st year makes enough cash to have even the shittiest porsche, which our boy AJ has

Just because it's the cheapest model Porsche currently makes does not make it the shittiest. The Boxter is an hommage to the old 550 of former days. The 944 of the 80's also had the cheapest price tag compared to the 964's and 930's, and to this day it is still regarded as a proper and superior drivers car. The Boxter, to some extent, fills that category.

Interesting post Edmundo. Looking forward to part 2.

Apr 28, 2010

I was actually referring to the growth of the U.S. economy from the late 30's till now, not the banking sector. If anything, the banking sector had a more managed growth than just about any other sector, with no real spikes or lags over that time frame (unlike Defense, for example). Sorry, I could have been more clear on that.

My contention is that the curbs that were put in place in 1934 gave the entire world the necessary confidence to invest in the U.S. and know they weren't going to be ripped off.

Apr 28, 2010
Edmundo Braverman:

I was actually referring to the growth of the U.S. economy from the late 30's till now, not the banking sector. If anything, the banking sector had a more managed growth than just about any other sector, with no real spikes or lags over that time frame (unlike Defense, for example). Sorry, I could have been more clear on that.

My contention is that the curbs that were put in place in 1934 gave the entire world the necessary confidence to invest in the U.S. and know they weren't going to be ripped off.

We had those same kinds of investors back in the '20s, as well. The investor protections we set up in the '30s definitely helped reassure investors, but I think it had a lot more to do with the fact that only two modern countries survived WWII without having their industrial infrastructure completely destroyed- and only one of those countries was open to investors.

So in other words, Glass-Steagall may have been good for the economy as a whole; WWII was much better, if it's possible for a war to be good for anything.

Apr 28, 2010

There are arguments that, for the duration of the war (not end), WWII was about as economically effective as fixing windows in broken window theory (aside from the economically beneficial tech that was invented during the war), because if people instead worked fervently in domestically productive industries it would have produced a greater effect. But of course that's not how people act and organize in reality, so you need a perfect alignment of the demographic planets caused by the winding down of a massive war to jumpstart the economy (which is dramatically economically positive, but not of the maximum theoretically efficiency that economists likes to masturbate to).

So, rather it's the demographic effects of war ending, than the wartime industries themselves.

Apr 28, 2010

I don't think that guy in that video represents all bankers. For one, that guy seems to think he's a 3rd year Associate. 23 year old analyst (likely 1st or 2nd year) with a Porsche downing drinks at $200 a pop? He's making it sound like he's Fabrice Tourre and club doors fly open with "models n bottles".
The problem with lowering entry level comp packages even more, is that you are going to weed out talented people who really want to be in I-banking for the right reasons. 60k a year base with insane working hours means someone will be averaging between $16 to $18 an hour and get maybe a week off.

Apr 28, 2010
moneyneversleeps2:

I don't think that guy in that video represents all bankers. For one, that guy seems to think he's a 3rd year Associate. 23 year old analyst (likely 1st or 2nd year) with a Porsche downing drinks at $200 a pop? He's making it sound like he's Fabrice Tourre and club doors fly open with "models n bottles".
The problem with lowering entry level comp packages even more, is that you are going to weed out talented people who really want to be in I-banking for the right reasons. 60k a year base with insane working hours means someone will be averaging between $16 to $18 an hour and get maybe a week off.

The problem is that 1/2 of the people on this forum (and 90% of the trolls- I am the odd troll who falls in the other 10%) seem to believe that life is all about being "baller" (whatever that means) and dropping $1500 for bottle service at the Pink Elephant on Friday night.. You know you probably belong in this industry if you automatically calculate out that you can get 7.5% net-of-inflation on MLPs and instead go to a regular bar, buy a few drinks at $10 each or less, and stick the $1470 in savings into your brokerage account on Monday morning and watch with an odd joy as the distribution checks come rolling in.

Apr 28, 2010

The Securities Exchange Act had very little to do with U.S. prosperity. It was a combination of our rise to dominance after WWII, policies of Reagan during the 80's, and the tech boom of the 90's. The economy actually reached an all-time low at around 1937, due to FDR's failed policies.

Regarding compensation, $100K all-in is too low if the hours stay the same. It's really tough to live in manhattan on just $100K.

Apr 28, 2010

The Securities Exchange Act had very little to do with U.S. prosperity. It was a combination of our rise to dominance after WWII, policies of Reagan during the 80's, and the tech boom of the 90's. The economy actually reached an all-time low at around 1937, due to FDR's failed policies.

Actually, the economy reached an all-time low in 1937 because FDR and the feds cut a lot of the stimulus and hiked rates.

The only reason the US got anything accomplished during the 1930s was because of the fiscal stimulus that Roosevelt pioneered. Was social security a good idea? Was the alphabet soup of government programs a good idea? Probably not- but we needed fiscal stimulus to counteract the deflation we experienced between 1929 and 1933.

Had it not been for the fiscal stimulus, the 1930s would have been even more painful, the country wouldn't have been in better fiscal shape, and we wouldn't have the Hoover Dam and the other big infrastructure projects of the '30s.

My only concern about the stimulus right now is that we need to be creating long-term value that will help us reduce inflation and debt when we go back to a secular bull market (likely still 5-10 years away). This is a really cheap time to be building a reprocessing plant for spent nuclear fuel and would allow us to get fifty times as much energy out of an ounce of uranium while cutting the time spent fuel stays radioactive to 500 years.

Regarding compensation, $100K all-in is too low if the hours stay the same. It's really tough to live in manhattan on just $100K.

+1. Think the hours need to come down, too.

Apr 28, 2010

Reagan left the U.S. in a huge deficit and his economic policy was a disaster for anyone not at the top, lowering taxes while increasing military spending to record highs is not good economic policy, conservatives need to get off this reaganomics bullshit, it is a failure. Every time we get a republican president we plunge further and further into debt, I shudder to think what will happen if another reaganomics supporter comes into office again.

Apr 28, 2010

Lets not get carried away 100k in Manhattan is in no ways hard to do. Now 50/60k is another story. I understand it may not be the life you ultimately want, but for 1st year out of school I don't see how it is in anyway a problem.

Apr 28, 2010
samiam1234:

Lets not get carried away 100k in Manhattan is in no ways hard to do. Now 50/60k is another story. I understand it may not be the life you ultimately want, but for 1st year out of school I don't see how it is in anyway a problem.

If you're earning $8K/month pre-tax rather than the old model of getting some of your compensation at year-end.

Also, what about saving for retirement and/or paying down student loans?

Apr 28, 2010
samiam1234:

Lets not get carried away 100k in Manhattan is in no ways hard to do. Now 50/60k is another story. I understand it may not be the life you ultimately want, but for 1st year out of school I don't see how it is in anyway a problem.

Agreed. There is a sense of entitlement amongst recent grads. I often find myself getting carried away with this same mentality. We want instant gratification and to be paid like rock-stars to live extravagant lifestyles. What's wrong with appreciating what it means to watch how our money is spent? Focus on savings and paying down loans? Obviously it'd be nice to get fat checks all the time, but I'd also like to appreciate that I have earned them.

Apr 28, 2010
moneyrunner:
samiam1234:

Lets not get carried away 100k in Manhattan is in no ways hard to do. Now 50/60k is another story. I understand it may not be the life you ultimately want, but for 1st year out of school I don't see how it is in anyway a problem.

Agreed. There is a sense of entitlement amongst recent grads. I often find myself getting carried away with this same mentality. We want instant gratification and to be paid like rock-stars to live extravagant lifestyles. What's wrong with appreciating what it means to watch how our money is spent? Focus on savings and paying down loans? Obviously it'd be nice to get fat checks all the time, but I'd also like to appreciate that I have earned them.

Well said. a big + 1 to you

Apr 28, 2010

Even with paying down student debt at lets say 1k/month and rent of 1000-1300/month for the first year you can do on 60k, especially after ur 10-15k sign on payments including relo and et al. to help with cash flow problems. especially knowing that at yr end you'll be getting atleast 10k after tax on your bonus if your that the low end (20k bonus), you should be able to make it through.

Retirement? how about waiting 1 more year until you get paid more, move into a nicer place and can get your ira going. Again i see where your coming form with the amount of hours worked for the low salary/hr, but then take into account overtime some banks pay and you probably wont go starving.

also, even if the trend if for decreased pay, or at least not a lot of growth from here, it seems to me the upside pay is so much more than the majority of other industries, practically all others, that it will still attract almost all who before were in it for the pay

Illin' I know you'll disagree don't worry about it, I just feel that yes the pay is less than before, but is still so substantial comparatively that it doesn't yet at these levels change much.

Sorry about hijacking the thread.

Apr 28, 2010
samiam1234:

Even with paying down student debt at lets say 1k/month and rent of 1000-1300/month for the first year you can do on 60k, especially after ur 10-15k sign on payments including relo and et al. to help with cash flow problems. especially knowing that at yr end you'll be getting atleast 10k after tax on your bonus if your that the low end (20k bonus), you should be able to make it through. Sorry about hijacking the thread.

I'll just quickly say that this is exceptionally optimistic. In reality, you'll pay $1500-$2K/month for rent in Manhattan, $1800/month for taxes on $5K/month if you live in NYC, and a bare minimum of $1K/month for other living expenses. I haven't covered transit, utilities, and gym membership either, yet.

Apr 28, 2010

I'll take the other side of the coin, lowering the comp will drive away the talent to places where they will be compensated appropriately for their "brains" and "hard work".

You better believe that if its not Wall St, it'll be something else 10 years from now. Eventually there will be no more careers like this (medicine, Wall St) and people will stop immigrating to the US, and the hard-working intelligent people out there will go to other countries that have lower regulations and a larger potential up-side for compensation. I would imagine the next career to burst will be the private Law Firm world, not only will they no longer have wealthy clients to pay fee hours from, if we keep the same regulatory foresight that this administration has I can see fee's being capped in that industry as well, and comp go down.

That's me being a realist, call it cynical or wrong, but do you truly believe that people who have spent + 100,000$ on their education at top universities, pulled all nighters to get good grades or publish research are, going to work in an IBD for 100 hours a week and make 90 grand a year?

They will find something, or horribly SOMEWHERE, else to utilize their talent and accumulate wealth for themselves and their families.

Look at the Animal Kingdom, if hunting's bad in one area what do the most intelligent predators do? They go to wear the hunting is good; we can't fault people for that, it's instinctive and makes sense. We don't live in an ideal world...

Apr 28, 2010
m.c.trader:

That's me being a realist, call it cynical or wrong, but do you truly believe that people who have spent + 100,000$ on their education at top universities, pulled all nighters to get good grades or publish research are, going to work in an IBD for 100 hours a week and make 90 grand a year?

So in other words, you're saying that private school tuition will have to come down- sort of like what we saw from the '30s through the early '80s. Alas, if only it happened 10 years earlier!

Apr 28, 2010

^^^^ Well isn't that part of the problem, especially with finance and business undergrads. They graduate in June and expect to be making 10k net, living in a duplex PH overlooking CP, "models n bottles" thurs-Sat, 3 months later. I made 70k as an entry-level analyst in Manhattan and I didn't go hungry nor did I fall into depression bc I couldn't contribute to my IRA or spend $350 on a $20 bottle of Moet at the Pink Elephant. My advice to anyone still wanting to do Banking is exactly what I was told when I first started: "Take care of your networking and skills and your compensation will take care of itself". From here on out the salary is out of your hands anyway bc if you don't accept the pay, there will always be a good 100 undergrads behind you who just want to be on Wall Street. Even if the window washer outside outearns them.

Apr 28, 2010
moneyneversleeps2:

^^^^ Well isn't that part of the problem, especially with finance and business undergrads. They graduate in June and expect to be making 10k net, living in a duplex PH overlooking CP, "models n bottles" thurs-Sat, 3 months later. I made 70k as an entry-level analyst in Manhattan and I didn't go hungry nor did I fall into depression bc I couldn't contribute to my IRA or spend $350 on a $20 bottle of Moet at the Pink Elephant. My advice to anyone still wanting to do Banking is exactly what I was told when I first started: "Take care of your networking and skills and your compensation will take care of itself". From here on out the salary is out of your hands anyway bc if you don't accept the pay, there will always be a good 100 undergrads behind you who just want to be on Wall Street. Even if the window washer outside outearns them.

That is the Northeastern mentality.

The Midwestern mentality is this:

"OMG. All of my relatives are getting laid off at the factory. I need to start saving money like crazy while I still have a job."

It eventually turns into:

"OMG. I can't stand this blankety-blanking hell-hole of a city. The only thing I see when I look out my window is concrete and pothole-ridden asphalt streets with angry cabs honking their horns. Every $50 I save is one fewer day I have to spend in this god-awful place and can spend in Northern Michigan."

Today, my desktop backgrounds are all images of open spaces in Michigan and Illinois. It reminds me of what I'm giving up whenever I spend money- a $50 cab ride home or an extra day of hang gliding at the Warren Dunes in fifteen years?

Apr 28, 2010

I was actually going to post something similar to what mctrader said. If the compensation goes down without a proportional decrease in hours, the whizzes from MIT and such schools are going to flock to another industry where they can be paid what they're worth. Why do you think they flocked to finance instead of engineering in the first place?

Then, banking will be left with the kids who couldn't get in when it was competitive. Now maybe that's a desirable social outcome, because you obviously don't need an MIT (or some other top school) grad to do an IBD analyst's monkey work.

Apr 28, 2010

Illin' where are you traveling where you take $50 cab rides except to the airport?

Apr 28, 2010
samiam1234:

Illin' where are you traveling where you take $50 cab rides except to the airport?

Anywhere in New Jersey from Manhattan.

Apr 28, 2010

Ack- double-post.

Apr 28, 2010

who goes to NJ?!? but seriously why would you travel that far into new jersey, just rent a zip car for a few more bucks a day and you can drive to your hearts content (restrictions do apply)...and wouldnt it be more fun to go out with your friends in manhattan instead of the shore, unless its snooki your after, then i wouldnt blame you

Apr 28, 2010
samiam1234:

who goes to NJ?!? but seriously why would you travel that far into new jersey, just rent a zip car for a few more bucks a day and you can drive to your hearts content (restrictions do apply)...and wouldnt it be more fun to go out with your friends in manhattan instead of the shore, unless its snooki your after, then i wouldnt blame you

Uhh, Hoboken is also NJ and it costs $50 by cab to literally drive two miles to the Lincoln Tunnel, go under the river, and drop me off.

Those of us who are too cheap to live in Manhattan tend to gravitate towards Jersey City, Hoboken, and Weehawken for the tax advantages and more open space. Brooklyn is nice, too, but you've got this 4% city tax to contend with.

Yes, I do have a zipcar membership. I also have an F4I for races, going down 9-W, and occasionally if I need to get somewhere and it's a warm, dry day.

Doesn't work quite as well if you're in IBD, but if you have reasonable hours, Hoboken is a great place to live. You get the added benefit of the state of NJ being a great (legal) local income tax shelter. Live in NYC for a few months, learn to hate it, and then move to Hoboken or Jersey City, where there's more open space and more down-to-earth people, but you still don't need a car.

Apr 28, 2010

i guess, i do have friends over there to do like it a lot, but not for me...ill stay in manhattan thank you.

maybe in like 10 years when im having kids or something ill need these open spaces, or not seeing that i live next to a huge park, baseball fields this time a year, ice skating in the winter, and soccer in the fall...gotta love manhattan its got everything! and yes they lay new sod for every season making ground balls incredibly smooth for the youngsters (no bloody lips, this is tribeca after all, well really fiidi but whos counting a few blocks)

Apr 28, 2010

Back to the point. Some reform- on the balance sheet and on disclosure- is very healthy.

Some reform- limiting what products can be sold- is much less healthy. Best to have a little reform now than have no reform now but a LOT of reform in five years after another crash.

Apr 28, 2010
IlliniProgrammer:

Back to the point. Some reform- on the balance sheet and on disclosure- is very healthy.

Some reform- limiting what products can be sold- is much less healthy. Best to have a little reform now than have no reform now but a LOT of reform in five years after another crash.

Hopefully that "little reform" is the right reform.. reforming for the sake of reforming (which I believe is happening in Washington) will not get us anywhere. Politicians that just want to get their name out in the public sphere as "the guy who took down Wall St." are not helping the cause as they don't know jack shit about finance.

I feel like reform will come, but not the correct reform and thus, another crash will occur- but who's to blame this time? For sure not those in Washington..

Apr 28, 2010

Well there's always been a sense of entitlement with fresh graduates. It's normal to have ambition and want to do well. The problem is that entitlement has gotten very far away from reality. When I finished undergrad, we all wanted to break 100k by 28, nowadays kids want that by 24. We are on our way back to old school I-Banking comp packages , pre 2003, where you really had to prove yourself and create business for your group to make one penney past 250k. Which in a way I don't mind. My brother was an I-Banker before 9/11 and those bankers "didn't go to sleep with a wh**** and didn't wake up to one".

Apr 28, 2010
moneyneversleeps2:

Well there's always been a sense of entitlement with fresh graduates. It's normal to have ambition and want to do well. The problem is that entitlement has gotten very far away from reality. When I finished undergrad, we all wanted to break 100k by 28, nowadays kids want that by 24. We are on our way back to old school I-Banking comp packages , pre 2003, where you really had to prove yourself and create business for your group to make one penney past 250k. Which in a way I don't mind. My brother was an I-Banker before 9/11 and those bankers "didn't go to sleep with a wh**** and didn't wake up to one".

Actually, many want it by 22.

I do think there needs to be an opportunity to earn $300K-400K/year by the time you hit 35 in this industry if you work hard enough and become an expert on something. Banking is a tough profession with tough hours, and it ought to pay better than accounting or technology for smart people.

The money needs to be there, but we need to provide an incentive for creating long-term value. I hate to say it, but maybe the notion of paying for not screwing up rather than "pay for performance (in the year it's delivered without looking at the potential future consequences)" may be a better model.

Keep the rewards there for experienced traders (and bankers) with consistent track records who keep risk under control; reduce the rewards for people who make $100 million one year and lose $120 million the next.

Apr 28, 2010

i remember when that video came out that a lot of his former classmates were saying how his parents bought him the boxster when he graduated and they basically pay for all his shit. so no worries he's clearly a huge tool

Apr 28, 2010
samiam1234:

i remember when that video came out that a lot of his former classmates were saying how his parents bought him the boxster when he graduated and they basically pay for all his shit. so no worries he's clearly a huge tool

Haha. Sounds like some of the people I went to high school with. One of them graduated Yale and is now a "ski bum" out in Colorado but somehow manages to afford a Range Rover and a really nice pad on all of that money from ski instruction.

Maybe that kid will follow in my high school classmate's footsteps and eventually become a victim of the supposedly evil inheritance tax.

Apr 28, 2010

Maybe Hong Kong jobs will stop being the butt of jokes when our banking system looks like Japan's.

Apr 28, 2010
lolbaringslol:

Maybe Hong Kong jobs will stop being the butt of jokes when our banking system looks like Japan's.

Yes. Then it will become the butt of even bigger jokes. //Sorry, couldn't resist.

In all seriousness, I haven't heard any jokes about Japan or Hong Kong. In fact, the only place I'm aware of that's the butt of jokes is Equities in Dallas.

Actually, that has to be a great conversation starter in the banking world. You go to the next CFA conference and you're like "Hi! I'm Tom. And actually, I work in equities in Dallas! :D"

Apr 28, 2010

Well, that's fair. Hong Kong isn't the butt of jokes, but every time I've seen it mentioned it's been looked down upon. I actually think the average compensation was higher in HK than NYC last year. I'm pretty sure the investment banking industry generated more revenue there. You also only get taxed at 16% instead of the extortionary rates and NYC's insulting surtax.

My point was that the bill does a whole lot more than doing things that most people concede are necessary, such as higher capital requirements. It basically puts a leash on the entire industry and hands it over to Washington politicos, as opposed to the Fed.

Apr 29, 2010
lolbaringslol:

I'm pretty sure the investment banking industry generated more revenue there.

Based on what facts? The entire Asian market is still a fraction of the US...

Apr 28, 2010

The only financial reform needed: END THE FED.

Monetary policy is the heart of all our problems.

Senators, Bankers and Bureaucrats are insiders in this giant scam of an institution.

"The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher." - Oscar Wilde

Apr 28, 2010

Here's a problem (I am admittedly biased given my profession) - language in certain versions of the bill that force banks to spinoff their swap desks. Talk about a major disruption in the market. All of the sudden trillions of dollars in contracts (notional) are restructured/settled/collateralized. Who the hell knows the unintended consequences of this bill. End-users of derivatives are already squwaking because the proposed regulation is so dangerous. Companies have a fundamental need to hedge risk as a part of their business - you need speculators or hedgers with the opposite risk position to take the other side. In the absence of a party with an identically opposite risk position, companies need an investment bank to take the other side.

Here's the way I see it: Investment banks transfer risk in a free market system - if you want to buy one share, the whole damn company, or CDS protection you call your investment bank. Limiting this activity is bad if not disastrous for the economy.

Will this additional layer of regulation make Wall St. more efficient as Edmundo proclaims? Not a chance. Since when has government regulation been a source of efficiency?

Apr 28, 2010
BigSwap:

Here's a problem (I am admittedly biased given my profession) - language in certain versions of the bill that force banks to spinoff their swap desks. Talk about a major disruption in the market. All of the sudden trillions of dollars in contracts (notional) are restructured/settled/collateralized. Who the hell knows the unintended consequences of this bill. End-users of derivatives are already squwaking because the proposed regulation is so dangerous. Companies have a fundamental need to hedge risk as a part of their business - you need speculators or hedgers with the opposite risk position to take the other side. In the absence of a party with an identically opposite risk position, companies need an investment bank to take the other side.

Here's the way I see it: Investment banks transfer risk in a free market system - if you want to buy one share, the whole damn company, or CDS protection you call your investment bank. Limiting this activity is bad if not disastrous for the economy.

Will this additional layer of regulation make Wall St. more efficient as Edmundo proclaims? Not a chance. Since when has government regulation been a source of efficiency?

Since when has government regulation been a source of efficiency? Hit the nail on the head

Apr 28, 2010

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Apr 29, 2010

"I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcom

Apr 30, 2010