Democrats are planning to stake a big part of their midterm election pitch on “cracking down on Wall Street.”
But the truth behind the financial reform bill is this: Some parts of the industry are getting cracked down on a lot harder than others.
And some firms, in fact, may wind up getting off pretty light.
Wall Street banks such as Morgan Stanley and Goldman Sachs — already in the spotlight over a government fraud case — should avoid a body blow.
That’s because the provision most potentially damaging to these firms — the forced spinoff of lucrative derivatives trading desks — is almost universally expected to be dropped or dramatically watered down. And limits on trading may not go into effect for years.
But there’s plenty of pain to go around. Traditional banking giants — such as Citigroup, JPMorgan Chase, Bank of America and Wells Fargo — may take the biggest hit, said analysts, lobbyists and industry executives.
That’s because banks that focus on consumer lending and other “retail” activities are facing a big cut in fees they generate through the issuance of debit cards, according to analysts and industry officials.
And they could also face tougher scrutiny from a new consumer regulator and the threat of increased legal action by state attorneys general looking to file high-profile and politically beneficial cases on behalf of consumers.
The amount of money banks have spent lobbying over the past 16 months helps illustrate the current stakes. According to a review done for POLITICO by the Center for Public Integrity, JPMorganChase spent $7.7 million lobbying on financial reform and other issues over that time period, while Citigroup spent $6.8 million.
Goldman, by contrast, spent $4 million, and Morgan Stanley spent $3.7 million.