It’s a HUGE message from Democrats this election cycle. “We need to take on Big Banks and get them broken up!”. Yes of course we do, but while everyone was not looking it’s already happening. You can also thank two people who are not even presidential nominees for doing it.
Elizabeth Warren’s Consumer Financial Protection Bureau and President Obama’s Dodd-Frank Act have put real pain on the big banks, regardless of what populists are saying. These rules are hurting, and they are forcing them to break themselves up for their own best interests.
According to a POLITICO report:
JPMorgan Chase is selling off a chunk of its private equity business. AIG is contemplating breaking into smaller pieces. Goldman Sachs and Morgan Stanley are watching trading profits dwindle with no real clue whether or when they will ever come back. Giant banks including Wells Fargo will now be required to raise about $120 billion in new capital. General Electric is getting out of the financial services business entirely.
The battle cry to break up the biggest banks and reinstate the Depression-era rule separating investment and commercial banking will certainly go on. But in concrete ways, the pitchfork-wielding forces looking to storm Wall Street’s gates continue to win big, even though headlines might make you think otherwise.
With serious popular fire coming from the likes of Bernie Sanders and Elizabeth Warren, a movement on both sides of the spectrum is recognizing that Big Money has neither your nor the nation’s best interests at heart. Even more moderate Wall Street-friendly players like Hillary Clinton have been moved left when it comes to the idea of breaking up Big Banks.
A senior executive at a large Wall Street bank, on condition of anonymity, said this:
Dodd-Frank, no matter what Bernie Sanders or anyone else says, has put a tax on the size of banks; you pay more if you are bigger, and there is real change because of it. Everyone wants to be more banklike and less tradinglike. People want to get more boring and smaller. No one is looking to bulk up.
The main takeaway for this, is that big banks are starting to actually lose substantial money when they mess around in Wall Street gambling rather than just the plain old “banking” we all know and love. Profits at Morgan Stanley fell 42 percent in the third quarter, specifically because of lower trading revenue. JPMorgan chase is looking to offload Highbridge Capital, the $22bn arm of its private equity business, due to regulations making it unprofitable for them to gamble with other peoples’ money.
The momentum is continuing with this as well. While more reform is definitely needed, to protect our economy and regular people, these regulations are strangling “big business” exactly how Republicans claimed they would, and it is exactly what is needed. Too big to fail seems to have finally failed in America.
Featured Image Gage Skidmore