Banks Earn Huge Profits After Whining About New Regulations

Thursday, 18 Jul 2013 08:24 AM

By Michael Kling

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Banks have been warning for well over a year that tougher regulations and stricter capital requirements would hurt their businesses as well as the overall economy.

Yet they've been announcing huge profits.

Goldman Sachs reported earnings of $1.86 billion for the second quarter, a 100 percent increase over a year ago. Citigroup had $4.18 billion in profits, up 42 percent, JPMorgan Chase had $6.53 billion, a 33 percent jump, and Wells Fargo, $5.5 billion, a 19 percent increase.

Editor's Note:
The Final Turning Predicted for America. See Proof.

Pundits are pointing out the discrepancy between the banks' whining about onerous Dodd-Frank regulations and their huge profits.

The enormous profits show that we should not take banks' whining seriously, says Slate's Michael Yglesias. Nor should we take seriously bank complaints about proposals for stricter capital requirements.

Requiring banks to drastically and immediately reduce leverage would cause substantial disruptions, he admits. But if they're earning billions in profits quarterly the task would be easier over time. They could simply use profits to increase their capital cushions instead of sending it to shareholders and executives.

At least giant banks with giant profits, Yglesias writes, are better than giant banks with giant losses, which would prompt a financial crisis.

The Huffington Post, calling record bank profits part of a long-term trend since the financial crisis, took a more critical tone: "Why, it's almost like they're not telling the truth when they warn, repeatedly, that these new rules will destroy their profits and the economy."

Regulators have finished fewer than 40 percent of the new rules required by the Dodd-Frank Act, The Post notes, citing the law firm Davis Polk.

While regulators just recently proposed larger capital requirements, banks are sometimes acting like they're already constrained by the new rules. Citigroup, for instance, is already close to meeting new leverage ratio requirements, and its traditional banking unit already meets the ratio.

Despite largely meeting requirements — which it has warned would wreck its lending along with the economy — its profits skyrocketed.

The big banks want to be quiet about their huge profits since making too much money would draw unwanted attention, according to The Post.

"If they can handle the rules that have been put in place so far with hardly a hiccup, maybe they can handle even higher capital requirements and new regulations on derivatives and trading."

Editor's Note: The Final Turning Predicted for America. See Proof.

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