The basic take-away for me was this statement:
And yet, from the moment Dodd-Frank passed, the banks’ financial results have tended to slide downward, in significant part because of measures taken in anticipation of its future effect...Partly, this is a function of the economic headwinds. But the bill’s major provisions—forcing banks to reduce leverage, imposing a ban on proprietary trading, making derivatives markets more transparent, and ending abusive debit-card practices—have taken a pickax to the Wall Street business model even though the act won’t be completely in effect till the Volcker Rule kicks in this July (other aspects of the bill took force in December; capital requirements and many other elements of the bill will be phased in gradually between now and 2016).
In other words, due to the current "economic headwinds" and the reforms of Dodd-Frank, the Wall Street business model that led to the financial crisis has been destroyed. My reaction was to think that's a good thing.
All Taibbi seemed to hear was whinning bankers.
Listening to Wall Street whine about how it is misunderstood is nothing new. It’s been going on for years (often in that same mag). But if Sherman’s piece heralds a new era of Wall Street complaining about how it is not only misunderstood but undercompensated, you’ll have to excuse me while I spend the next month or so vomiting into my shoes.
Its true, Sherman did quote a couple of Wall Street folks talking about how the days of 7-figure bonuses were over. But I fail to see how anything in the article suggests that's a bad thing.
Taibbi seems obsessed with the bonus issue. I don't think that's uncommon for a lot of people in this country...its come to be the symbol of all that was wrong with Wall Street. But a symbol is - by definition - not the source of the problem. And what Sherman did was explain to us that the symbol is now gone because the root problem - over leveraging, proprietary trading, and mysterious derivatives - have been dealt with via Dodd-Frank.
Taibbi's other point seems to be that he REALLY wants to make sure that Dodd-Frank doesn't get any credit for the changes happening on Wall Street. Even though Sherman acknowledges that the current economic headwinds have had an impact, Taibbi wants to assert that any tamping down that's happening now is a result of the Euro crisis.
Now, Gabe Sherman barely even mentions Europe in his article, which is interesting, because the banks on whose behalf he wails so loudly in this piece have mostly all pointed to Europe as more or less the sole reason for their reduced revenues of late.
I'm certainly not well-versed enough in all of this to quantify the degree to which regulatory reform vs on-going stresses in the world markets have had on the changes we're seeing. But I can say this: first of all, its silly to simply dismiss regulatory reform as a contributor and secondly, the fact that these companies are having to change their business model as a result of the on-going failures we continue to experience from their past mistakes is a good thing - is it not?
But here's the most ludicrous statement of all from Taibbi on Sherman's article:
1. He’s wrong. See the above argument about Europe, QE, etc.
2. Even if he wasn’t wrong, which he is, his reaction to the "news" that Wall Street’s outsized bonuses are dropping is all wrong. If it were true, it would be good news, not bad news.
That #2 gets back to my original point. Yes, its good news! And that's how I read it from the beginning. Taibbi seems to suffer from the same malady I talked about last night...the inability of some folks to take "yes" for an answer. Is it too early in the day to give out the Crybaby of the Day award?