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December 28, 2011

Wall Street Meets Reality

“The weak economy, volatile markets, toxic mortgages and potential exposure to the euro zone are undeniably the biggest drags on banks’ profits. But bankers, their lobbyists, and the politicians who do their bidding are eager to heap outsize blame on new national and international bank rules, including trading curbs, consumer protections and higher capital requirements.”

“New regulations, properly implemented and enforced, will crimp the banks’ profitability. But that is not a sign they are defective — just the opposite. It shows that the rules are beginning to work as intended to rein in destructive products and practices that inflated the bubble, led to the crash and necessitated the bailouts. Higher capital levels, for instance, mean a hit to bank profits. But they are a boon to the broader economy because they help to restrain speculation and to ensure that banks — not taxpayers — absorb unexpected losses.”

Read the full editorial here.

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