Inside the great investment houses on Wall Street, business has taken a surprising turn — downward.
Even after taxpayer bailouts restored bankers’ profits and pay, the great Wall Street money machine is decelerating. Big financial institutions, including commercial banks, are still making a lot of money. But given unease in the financial markets and the economy, brokerages and investment banks are not making nearly as much as their executives, employees and investors had hoped.
After an unusually sharp slowdown in trading this summer, analysts are rethinking their profit forecasts for 2010.
The activities at the heart of what Wall Street does — selling and trading stocks and bonds, and advising on mergers — are running at levels well below where they were at this point last year, said Meredith Whitney, a bank analyst who was among the first to warn of the subprime mortgage disaster and its impact on big banks.
Worldwide, the number of stock offerings is down 15 percent from this time last year, while bond issuance is off 25 percent, according to Capital IQ, a research firm. Based on these trends, Ms. Whitney predicts that annual revenue from Wall Street’s main businesses will drop 25 percent, to around $42 billion in 2010, from $56 billion last year.
~~~The downward slide on Wall Street parallels a similar shift in the broader economy, which has slowed considerably since showing signs of a nascent recovery this spring. And if banks come under pressure, all but the safest borrowers may struggle to get loans.
~~~Banks are also scaling back on making bets with their own money — known as proprietary trading — another huge profit source in recent years that will soon be forbidden under terms of the financial reform legislation passed by Congress this summer.
~~~Ms. Whitney says the gloomy short-term predictions foreshadow a series of lean years in the broader financial services industry.
Indeed, she said the Street faced a “resizing” not seen since the cutbacks that followed the bursting of the dot-com bubble a decade ago.
“We expect compensation to be down dramatically this year,” she wrote in a recent report. She predicts the American banking industry will lay off 40,000 to 80,000 employees, or as many as 1 in 10 of its workers.
Ok, not surprising. After signing a bill meant to scapegoat Wall Street earlier this summer how in the world could Obama and pals be surprised at this result? Especially when the real culprit of the economic collapse was the housing bubble brought on by CRA and the Democrats. Oh, there were many other reasons for it but if you’re asking for the major catalyst….the CRA.
So couple the collapse of the housing market and our economy with Obama’s anti-business attitude and we get this; A recession that hasn’t been seen before in a long time. 40-80,000 employee’s at Wall Street who will be in the unemployment line. Fewer loans will be made by banks, less growth, no jobs…..less expansion if any.
And what do we have to look forward to?
Obama increasing taxes!
What a leader.
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