President Obama would have you believe that the financial regulation debate has two sides: (1) reformers and consumers vs (2) greedy bankers. But there’s a lot more going on. There are investment banks, commercial banks, hedge funds, private equity firms, car dealers, community banks, credit unions, and many others. A general rule when following these complicated rumbles is to ask “who has the strongest political connections?” and then assume that side will win.
The conference committee to sort out the differences between the House and Senate bill doesn’t convene until next week, and that’s when you can expect to see the Goldmans and the hedge funds start running the table while the community banks take it on the chin.
Until then, I recommend a couple of recent articles:
“Not all banks spanked by reform,” in Politico gives some idea of the various sides. However, the piece ignores the important fact that adding compliance costs often helps the biggest banks by crushing the smaller guys.
“Financial regulatory reform: turning private equity into shadow banking” in Fortune. Here’s a highlight:
new financial regulations could create some new business opportunities.Most likely to reap the benefits of a regulatory overhaul are sprawling firms like Blackstone, Carlyle, and KKR, whichbuilt up significant lending and advisory businesses over the past few years.
And in conjunction with this Fortune piece, read my article on the hedge funds and Chuck Schumer.