America 2.0
Bloomberg says that the financial regulation bill would force US investment banks to raise $250 billion in capital, create strange fiduciary obligations where none previously existed, and send much of the global swaps and derivatives business to foreign institutions:
JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among U.S. investment banks that may be forced to raise an additional $250 billion in capital, cut executive pay and divest some of their most lucrative assets under a bill on the U.S. Senate floor today, analysts say.
A two-page provision tucked inside the 1,558-page bill on April 21 would change the structure of about 40 of the largest U.S. investment banks by forcing them to spin off their derivatives businesses. Another measure added this month would require derivatives dealers to maintain a “fiduciary duty” to municipal, pension and retirement plan investors, which some analysts say would wipe out that market altogether.
“The bill has moved so far left so hard, that it’s caught everybody by surprise,” said FBR Capital Markets analyst Paul Miller…The spin-off provision would result in a capital deficit of $85 billion at eight of the largest global investment banks, analysts led by Kian Abouhossein at JPMorgan Securities in London estimated in a research note today….“We continue to believe that the proposed regulatory changes would have a significant impact on global return on equities, declining from 19 percent pre-regulation to 12 percent,” Abouhossein wrote.
Is any of this surprising? We have an out-of-control administration aided and abetted by 20-something congressional staffers who write the legislation and who know nothing about business, except that it’s bad. Oh well, no big deal. We just now live in an America that wants to drive its best paying jobs out of the country, and sends SWAT teams to harass grandma and grandpa. It’s America 2.0 — new and improved.