The new, soon to be proposed Volcker rule is supposed to be tough for investment banks like Goldman Sachs (GS), Morgan Stanley (MS), JPMorgan Chase (JPM) and Bank of America (BAC).
ASSOCIATED PRESS That’s because the rules as presented are supposed to do everything but tie traders’ hands behind their back in order to prevent them to trading for their firm’s (and their own) profit. And we know how important trading has been, especially for Goldman Sachs and Morgan Stanley.
The Wall Street Journal explains the new rules:
The Federal Deposit Insurance Corp., Federal Reserve Board and Securities and Exchange Commission on Tuesday approved the Volcker rule, ushering in a new era of tough oversight that drills to the core of Wall Street’s profitable markets and trading businesses.
The rule will put in place new hurdles for banks that buy and sell securities on behalf of clients, known as market making, and will restrict compensation arrangements that encourage risky trading. The Fed also approved an extension to give banks until July 2015 to comply with the rule, though firms will be expected to make “good faith” efforts to get into compliance earlier.
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You wouldn’t know the rules are so tough just by looking at the stocks, however. Goldman Sachs has jumped 1.5% to $170.26; Morgan Stanley has risen 1.4% to $30.82; JPMorgan has gained 0.5% to $56.81; and Bank of America is unchanged at $15.58.
As a trader, I was taught that when the news and the tape disagree, trust the tape. And the tape is telling us that Morgan and Goldman got off easy.
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