I have to confess that the latest ‘reform’ legislation has aroused a bit of skepticism in me. The Senate just passed a 2,000 page bank reform bill that was positioned as a tough measure to reform big banks and Wall Street. The goal is to make sure events like the financial panic of 2008 never happen again. Who could argue with that? However, this statement from the chief architect of the legislation, Senator Christopher Dodd (D-CT), aroused my concerns. He was quoted in this Washington Post piece as saying, [emphasis added]:
“It’s a great moment. I’m proud to have been here,” said a teary-eyed Sen. Christopher J. Dodd (D-Conn.), who as chairman of the Senate Banking Committee led the effort in the Senate. “No one will know until this is actually in place how it works. But we believe we’ve done something that has been needed for a long time. It took a crisis to bring us to the point where we could actually get this job done.”
I’ll leave aside any snarky comments about the fact that the Senator got teary-eyed over this. Otherwise, I may have to get some mandatory sensitivity training or something. My main concern was the last point he made: ‘No one will know until this is actually in place how it works.’
Not exactly reassuring, eh? One would hope that the chief architect of legislation would have a pretty fair idea of how a bill will work in practice, but maybe that’s an old fashioned concept. Though the Senator claims no one will know how this 2,000 page bill will work out, I think the evidence is already in that at least one group knows. What evidence you ask?
From a lengthy MarketWatch.com piece on the potential impact of the legislation, note the ironic juxtaposition of a statement from a bank analyst about how big banks (financial supermarkets) will be hard hit by this legislation right next to stock quotes showing those very stocks soaring. The stock quotes are embedded in the text [emphasis added]:
…”Financial supermarkets” like Bank of America Corp. (BAC 15.42, +0.40, +2.66%) , Citigroup Inc. (C 3.94, +0.16, +4.23%) , J.P. Morgan Chase & Co. (JPM 39.44, +1.41, +3.71%) and Wells Fargo & Co. (WFC 27.05, +0.19, +0.71%) will be hit the hardest, the analyst said…
Hard hitting legislation? On the day it was announced, we have Bank of America (NYSE:BAC) up 2.66%. Citigroup (NYSE:C) up 4.23%. JP Morgan (NYSE:JPM) up 3.71%. Wells Fargo (NYSE:WFC) up on 0.71%. We will see how this works out in the long run, but I suspect the answer to Sen. Dodd’s assertion lies in the paragraph above.
The big banks know how this will work out. They like it.
Disclosure: No positions