Thursday, November 10, 2016

Better Than What They Paid For

Big Bank stocks' increase in less than two days: Citigroup +7.82%, J.P. Morgan Chase +9.68%,
Bank of America +10.91%, Goldman Sachs +11.60%, Wells Fargo +13.78%

Hillary Clinton was the friend of Wall Street, but the election of Donald Trump, coupled with the Republican retention of both houses of Congress, has powered financial stocks higher probably beyond bankers' wildest hopes if their candidate had won. One reason could be the President-elect's desire to streamline cumbersome Dodd-Frank regulations:
House Financial Services Committee Chairman Jeb Hensarling (R., Texas) last year laid out a blueprint for replacing Dodd​-Frank​, and ​ many observers view ​that ​as a starting point. It is built around a trade-off: Banks can free themselves from various regulations, such as tough stress testing, so long as they maintain capital equal to at least 10% of total assets and high ratings from the regulator.
Republicans should temper their enthusiasm for helping the banks. Sure, get rid of red tape that slows everything down and maybe loosen capital requirements slightly, but be very cautious about letting the financial gunslingers roam free. [bold added]
[Republicans] also risk losing support if they push too far, according to lobbyists and congressional aides.

For instance, some Republicans are split over the idea of removing Title II of Dodd-​Frank, which gives financial regulators authority to take over and unwind huge financial firms as a way of avoiding future bailouts. On the other hand, ​Republicans might need to pick up some Democratic votes to move the bill through the Senate, and that party is almost sure to oppose major changes to core Dodd-Frank provisions, such as the Volcker ​rule barring banks from some forms of proprietary trading.
The wounds from the 2008 financial crisis that ruined millions are still fresh, and folks, your allegiance is to the people who elected you, not the Wall Street elite who will throw you over the side if they can get a better deal from the other guys.

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