Banks’ options now? Sue, lobby or charm
Wall Street firms gambled on Mitt Romney and lost.
Now, faced with the prospect of even tougher regulations in President Barack Obama’s second term, they have to build better ties with the financial regulators he will appoint.
Stock investors fear banks will meet with limited success. Shares of Goldman Sachs, JPMorgan Chase and Citigroup dropped 6 percent, Bank of America lost 7 percent and Morgan Stanley fell 9 percent in midday trading Wednesday.
Obama lost the support of many bankers in the aftermath of the 2008 financial crisis and the passage of the 2010 DoddFrank financial overhaul law, which sought to shore up the financial system but also cost banks billions of dollars in annual profit.
The Democratic president has stated his distaste for “fat cat bankers” who “don’t get it,” and bankers fear more trouble is ahead if they cannot influence how the Dodd- Frank rules are implemented.
“He will continue to increase regulation, demonize and vilify businesses, and spend a lot of money, and tax people, and so forth,” said Dick Kovacevich, a former Wells Fargo CEO and supporter of Romney.
Wall Street does have some ways to push back. Banks can sue to try to block provisions of DoddFrank that they object to, a tactic that has met with somesuccess. The financial industry can also press regulators to write rules that soften some of the laws.
And banks can roll up their sleeves and turn on the charm, which can help, industry lobbyists said.
“We’re going to have to do a lot of heavy lifting over the next four years. But it’s not an impossible task,” said Frank Keating, chief executive of the American Bankers Association.
But given that Obama won and that financial reform is popular among Americans, many on Wall Street acknowledge that there’s only so much they can do.
“Obama will be less likely to hold back on regulation this term,” said Chris Tobe of Stable Value Consultants. The industry’s support for Romney does not help, he added.
People in theU. S. securities and investment industry gave $ 20 million to Romney’s campaign, versus $ 6 million to Obama, according to the Center for Responsive Politics.