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Wall Street’s Top Strategy: Besiege The Regulators

Posted by Larry Doyle on July 25, 2013 8:27 AM |

Everyday we hear of a new recommended strategy put forth by analysts on Wall Street.

Some of the supposed smartest people in the business recommend sector rotation strategies, others a new found pro-growth approach, still more prefer a style that accentuates value, and others investments that generate income.

There are seemingly as many strategies on Wall Street as there are strategists.

Of all the strategies put forth by Wall Street, though, what do you think is the top Wall Street strategy — not for you, the investor — but for the industry itself? I have no doubt as to the answer to this question.

The strategy that Wall Street is most keen in employing is one known as “besiege the regulators.” This strategy is closely aligned with that known as “pay off the politicians.”

While you may get inundated with materials on Wall Street’s voluminous aforementioned strategies, I am going to guess that you do not receive much material on the “besiege the regulator” strategy. No, we have to find the data on this strategy on our own. Let’s navigate and see just how hard Wall Street works on this key strategy.

Our friends at Corporate Counsel recently exposed the following:

Representatives of Goldman Sachs Group Inc., JPMorgan Chase & Co., and Morgan Stanley & Co. are taking up the most space in the calendars of federal regulators tasked with implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act, according to an open-government group’s (The Sunlight Foundation) new analysis, “What the banks’ three-year war on Dodd-Frank looks like.

Those financial institutions met with agency officials about the statute more often than any other organizations since Dodd-Frank became law in July 2010 in the wake of the 2008 financial crisis, the Sunlight Foundation report released on Monday shows. With 222 meetings, Goldman Sachs had the most conversations with regulators, followed by JPMorgan Chase with 207, and Morgan Stanley with 175.

Derivatives markets and products were the top topics of discussion for Goldman Sachs and Morgan Stanley, while the proposed Volcker Rule was JPMorgan Chase’s leading interest. The Volcker Rule, which has yet to go into effect, is intended to prohibit risky investments at banks.

“By most accounts, the banks’ besiege-the-regulators strategy has yielded rich rewards in sapping, slowing, and stymieing regulations intended to prevent another massive financial crisis,” Sunlight senior fellow Lee Drutman wrote on the foundation’s website. “The emerging consensus is that Dodd-Frank implementation is limping, while the big banks are poised to return to being the most profitable industry in the U.S.”

I am NOT a big believer that Wall Street and our economy simply need massive amounts of new regulations.

Regulation should not be a question of more or less regulation but rather the implementation of the right regulations that protect investors, consumers, and taxpayers while also promoting real economic growth. I am a big believer in that approach ALONG with the requisite enforcement of those regulations. We seemingly get little of either of these.

Do you think all these meetings being held with regulators — primarily the Federal Reserve — are properly representing the interests of investors, consumers, and taxpayers? NFW . . . but meanwhile we are fed a bill of goods by those charged with representing the public interest that Wall Street has been reformed.

Sure . . . and I have a bridge to sell you as well.

Navigate accordingly.

Larry Doyle

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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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