19/10 Have Regulations Hurt Bank Profits?

Updated October 19, 2011 04:23 PM

Introduction

Josh Haner/The New York Times

This earnings season has brought a grim prospect to Wall Street, Susanne Craig writes in The New York Times this week: "Banks, required by regulators to discontinue high-profit businesses like proprietary trading, reduce borrowings and hold more capital, may no longer be able to produce the supercharged earnings that were common before the financial crisis."

It's not just investment banking; even the profit engines of consumer banking are slowing. Last week, when JPMorgan Chase posted lackluster profits, The Times reportedthat one factor was "the elimination of overdraft and other penalty fees." Another articleobserved that Citigroup's revenue had fallen in part because of "the evaporation of many of the lucrative fees that kept its consumer businesses afloat." Even the relatively solid profits from Bank of America and Wells Fargo offered little solace to investors, because both were inflated by one-time benefits rather than the fundamentals.

Have recent regulations hurt banks' short-term profitability? And if so, is that a bad thing?

Debaters

• Banks Should Welcome Rules

  William K. Black, professor of economics and law

• The Scourge of Debit Fees

  Michael Calhoun and Wade Henderson

• Shrinking, as They Should

  Nicole Gelinas, Manhattan Institute