Things Really Have Changed on Wall Street  

Goldman Sachs CEO Lloyd Blankfein chats with Sen. Debbie Stabenow (D-Mich.).

Photo by Bill Pugliano/Getty Images

When I linked yesterday to Ben White’s Politico piece about how Dodd-Frank has done much more to put Wall Street on a leash than is generally appreciated, a lot of folks reacted with incredulity. But if you dare cross the Financial Times paywall this morning you’ll find a not-about-politics piece from Tom Braithwaite, Camilla Hall, and Gina Chon making a similar point:

Wall Street’s earnings season has dashed hopes the sector would bounce back from its post-crisis doldrums, with Goldman Sachs posting weak results in fixed income trading and Citigroup missing analysts’ forecasts for the second consecutive quarter.

Financial stocks suffered a significant sell-off. Citi fell more than 4 per cent and Goldman more than 2 per cent, after the two banks reported lacklustre fourth-quarter and full-year results. JPMorgan Chase and Bank of America reported mediocre results earlier in the week.

Trading in bonds, currencies and commodities – Wall Street’s driving force for three decades – continues to struggle. Citi and Goldman suffered the worst year-on-year declines, both down 15 per cent, while Goldman’s full-year revenues in bond trading were the worst since 2005. Morgan Stanley, the last big securities firm to report, reports on Friday.

Now, look, I get the political gamesmanship here. After spending 2009 and 2010 fighting tooth and nail against the passage of the Dodd-Frank bill, then spending 2011 trying to halt its implementation, then spending 2012 trying to elect Mitt Romney and a GOP Senate that would repeal the bill, then spending 2013 again trying to halt its implementation, the financial services lobby has suddenly started proclaiming that Dodd-Frank is working great. And it’s no mystery why. They fear the passage of some sort of legislation to cap bank size, they fear Federal Reserve implementation of stricter capital requirements, and they fear the political push to see more criminal indictments in future cases regarding bank misconduct.

So people who want tougher bank regulation have decided they don’t want to see any hint of regulators declaring victory.

But life should admit of some complexity. There’s a lot to worry about, like banks using the Basel process to undermine hard-won gains from Dodd-Frank or Congress so badly underfunding the regulatory agencies that they can’t do their jobs. There’s a case to be made for additional legislation beyond what’s passed. But it’s simply not the case that nothing’s been done or that nothing has changed. There’s a reason the financial services industry has worked so hard to block, stall, and undo the legislation that’s already passed.

Correction, Jan 17, 2014: The caption on a previous version of this post misspelled the last name of Sen. Debbie Stabenow.