In the interest of good aesthetics, I’ve made a point of keeping the economics work separate from the musical suggestions. But this week I violate that, combining a strange and dissonant article about how DC’s financial market regulation has just completely dominated those formerly high rollers up on Wall St., with the great R&B artist Louis Jordan’s version of “Ain’t Nobody Here but Us Chickens!”
I’m sure that some of fin reg (Dodd-Frank financial market regulation) is having salutary effects, but not nearly as much as the piece claims: the big banks are merely shells of their former selves, lobbyists are finding it “impossible…to beat back any of the newly imposed regulations,” “Wall St. is struggling to make money”??!!
Yes, there’s less derivative trading and both the Volcker Rule (which is only now being brought on board) and higher capital requirements (banks holding more capital against possible losses) are dampening some of the excessive leveraging and “innovative” finance that contributed mightily to the great recession. But at this point in the game, the author is conflating cyclical, or temporary, outcomes with the impact of fin reg. That is, banks are still pulling out of their “Minksy moment,” when they shifted aggressively from underpricing to over-pricing risk. Moreover, some of the big fin reg stuff hasn’t been tested yet, most notably resolution authority of failed financial institutions.
On the other hand, I’m sure some of the denizens of Wall St. would very much like regulators to know how hard they’re struggling to eke out a dime under the yoke of fin reg. Just like those foxes in the henhouse tell it at the end of the song:
There ain’t nobody here but us chickens!