For a minute, it seemed as if Wall Street was in the clear, about to settle into a boring new post-crisis normal after paying off billions in federal fines and getting weighed down by piles of compliance rules and paperwork.
The future wouldn't be exciting, but at least bank balance sheets were recovering from the ravage of the mortgage crisis. Even Bank of America and Citigroup, arguably the sickest institutions after 2008, seemed to be getting healthier by 2011. Warren Buffett was getting paid. The world was righting itself.
Then, for some reason, slowly, everything started to suck again.
Think about it. This week alone, Bank of America announced that it had made a big mistake calculating its capital and had significantly less than it had told regulators during its first-quarter earnings. BNP Paribas reportedly may have to pay a fine of as much as $2 billion for violating U.S. international sanctions, while prosecutors reportedly are getting ready to press criminal charges against it and Credit Suisse. The banks might even plead guilty.
And then there's Barclays bank. Not only does it have to create a 'bad bank' to separate and try to spin off more than $90 billion worth of toxic assets it's holding (like Citigroup during the darkest days of 2009), but it was also embarrassingly called out in the Financial Times' opinion page this weekend by a former investment bank head and shareholder who wrote that Barclays was overcompensating bankers for abysmal performance.
After two years of earnings misses, Barclays' numbers make that hard to argue with.
Accompanying this deluge of bad news there's the feeling that the rest of the world is paying attention again. Credit Michael Lewis for that. His book "Flash Boys," which tells the story of how a few traders at the Royal Bank of Canada realized that high-frequency trading firms, in collusion with stock exchanges, are capitalizing on their unfair advantage in the market, has everyone wondering how safe the stock market is to play in.
It was on "60 Minutes," so mom and pop found out about the whole thing.
SEC Chairwoman Mary Jo White had to hear all about it at the House Financial Services hearing yesterday, when congressmen asked her over and over if she realized that Americans have zero faith in her agency's ability to do its job.
Should we go on?
Thanks to its accounting mistake, Bank of America can't pay dividends back to shareholders or buy back stock, but it has company. Citigroup can't do any of that either, since the Federal Reserve decided the bank simply didn't have adequate oversight over its operations.
As CLSA analyst Mike Mayo pointed out to Business Insider, if you want to make the argument that these banks are too big to manage, now is the time to do it.
"Elizabeth Warren is somewhere doing a jig right now," said Mayo, after Bank of America admitted its error this week.
The thing is, it isn't just Warren. In fact, it isn't just the left. On the right side of the political spectrum, Tea Party politicians like Senator Ted Cruz (R-Texas) have never been friendly to Wall Street.
On top of that, Senator David Camp, a Republican not known for his radical views, joined the Democrats in opposing a beloved Wall Street tax loophole called carried interest. And he may even live to see another day, proving that you can turn your back on The Street and live to tell about it.
Not even Goldman Sachs is immune to the malaise. Inside the bank there is concern for its equities-trading business. Goldman is losing share to its competitors, and Goldman doesn't lose anything. It doesn't even like the word "share."
So for now, Wall Street is looking a lot like Mudville after Casey struck out.
There's your update.
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