Based on the recent trend of slipping systemically critical labels under the front doors of financial institutions as easily as take out menus, the US is setting the stage for the era of average banking. The regulatory overlords seem hell-bent on establishing a landscape of average size banks making average size profits. However, as little as DC wants to hear it, there is still a convincing argument for bigger is better. Just because the Sandy Weil/Chuck Prince experiment failed in spectacular fashion, with special help from Bob Rubin, that shouldn’t condemn firms like JPM to live with Washington’s acumen in determining the proper size and shape for a bank.
The Perils of a Smaller Wall Street [WSJ]
systemic risk
Now that it appears that the financial system has escaped a Chernobyl meltdown, lines are being drawn in the sand to define the cast of characters who might be in a position to cause a financial nuclear winter in the future. It’s no surprise that the hedgies are front and center in the debate over who could pose a systemic risk to the US and the global financial system. As regulators on both side of the Atlantic draft legislation to determine just how tight the vice will be for the hedgies going forward, at least one guy who has a pretty good idea of what happens when a hedge fund meets its maker is taking up the ‘it’s not us’ campaign.
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