NYT shocked, shocked to see Wall Street declining

posted at 10:12 am on September 20, 2010 by Ed Morrissey

For some, this will look more like a feature than a bug.  For those who know that Wall Street firms provide key capital for economic expansion, however, the massive slowdown in investor transactions will be a dark portent indeed of economic malaise for the next several years.  Two years of unprecedented class warfare makes this news entirely unsurprising except to the media that have led the charge:

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.

How exactly does this qualify as a surprise?  Congress passed a massive expansion of regulation on Wall Street at the beginning of summer; in fact, it’s the only action they’ve taken in two years of which voters approve.  The new regulatory regime was intended to limit creativity and innovation in investor instruments, and the natural consequence of such action is to get less production in the end.

And guess what that also means?  More unemployment.  The banking sector will shed somewhere between 40,000 and 80,000 jobs according to Whitney, which is about 10% of the total number employed in the industry.  It also means fewer loans to businesses and individuals, which will mean less expansion, less growth, and no job creation in the next few years.

No one doubted that Wall Street regulation needed some updating to cover new practices and instruments.  However, the action by Congress this year was punitive in nature, and in any case didn’t address the actual root cause of the collapse, which was the social engineering conducted by Congress itself in the housing markets through Fannie Mae and Freddie Mac.  The wages of that punitive action will be felt not just on Wall Street, but on Main Streets everywhere as capital dries up or moves overseas, and Wall Street becomes a secondary trading and investment center worldwide.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Capitalist pigs!

faraway on September 20, 2010 at 10:14 AM

Punishing economically successful people leads to less economic success? The beatings will continue until morale improves!

rbj on September 20, 2010 at 10:15 AM

It’s a surprise because they had a ban on the adverb: “unexpectedly”.

saveliberty on September 20, 2010 at 10:16 AM

The longest-lasting economic downturn since the Great Depression. I wonder if the liberalism of the presiding presidents had anything to do with each of these bad economies? Nah, just a coincidence.

itsnotaboutme on September 20, 2010 at 10:16 AM

Regulation – it’s how to grow stunt business!

beatcanvas on September 20, 2010 at 10:17 AM

However, the action by Congress this year was punitive in nature, and in any case didn’t address the actual root cause of the collapse, which was the social engineering conducted by Congress itself in the housing markets through Fannie Mae and Freddie Mac.

It still amazes me how so few realize that the Democrats and their agenda are ground zero for economic collapse. Republicans warned this would happen

Guardian on September 20, 2010 at 10:19 AM

BTW that was conjecture on my part.

saveliberty on September 20, 2010 at 10:20 AM

Hey! Since Obama took over car companies, banks and financial institutions to save the economy … maybe the Repubs can take over the NY Times, NBC, CBS and ABC to save the media!

darwin on September 20, 2010 at 10:23 AM

The finance sector layoffs are already starting in NYC.

TimTebowSavesAmerica on September 20, 2010 at 10:23 AM

The depth of Democrat and leftist stupidity is just simply astounding.

When Russian and Chinese leftists were starving millions to death with their idiotic ideology, they were just as arrogant as these clowns we have in the White House and Congress.

They just can’t believe that their policies are miserable failures.

After all, in their mind, they are smarter than all of us and cannot possibly be wrong.

NoDonkey on September 20, 2010 at 10:24 AM

We need more education about this.

Revenge is a stupid way to run a market.

Why is it that people support revenge instead of sense?

petunia on September 20, 2010 at 10:25 AM

The wages of that punitive action will be felt not just on Wall Street, but on Main Streets everywhere as capital dries up or moves overseas, and Wall Street becomes a secondary trading and investment center worldwide.

Progress.

BobMbx on September 20, 2010 at 10:25 AM

George Bush and those Tax cuts for the rich have really hammered the financial section in this country.

Koa on September 20, 2010 at 10:28 AM

Punishing economically successful people leads to less economic success? The beatings will continue until morale improves!

rbj on September 20, 2010 at 10:15 AM

What does is say when the President runs around the country to primary and secondary schools touting the necessity of an education to be successful, and then walk down the street to the union hall and accuse successful people (making over $250k) of being evil?

To me, it says “Hey, I’m just looking for votes”

BobMbx on September 20, 2010 at 10:28 AM

Dinosaur Media makes my hair hurt.

Dr Evil on September 20, 2010 at 10:30 AM

Liberalism is defintely a mental disorder. The New York Times has been a propaganda tool of the Sulzberger family for decades. The state of New York is bankrupting almost as fast as the Times, but it will be “unexpected”, of course. The lemmings who read that rag have no conception of truth because the truth is foreign to what garbage they feed their readers. Artie Sulzberger makes Joseph Goebells look like George Washington.

volsense on September 20, 2010 at 10:31 AM

However, the action by Congress this year was punitive in nature, and in any case didn’t address the actual root cause of the collapse, which was the social engineering conducted by Congress itself in the housing markets through Fannie Mae and Freddie Mac. The wages of that punitive action will be felt not just on Wall Street, but on Main Streets everywhere as capital dries up or moves overseas, and Wall Street becomes a secondary trading and investment center worldwide.

Until this action by Congress is answered and those who denied anything was wrong are summarily punished, nothing is going to change, that’s establishment politicians at their best.

The aim IS to collapse the Free Market concepts, and yet when you listen to Andy Stern who is/was in China, when asked how China will progress, he states, “using the free market,” wow, really?

Does anyone wonder about American Unions now going global? Does anyone seriously believe that the Unions still have the american workers rights at heart? When they helped to force american jobs to go overseas, how will your Union now fight for you against any, lets say, chinese worker who earns 2 bucks an hr…all the unions will do is continue to suck the workers dry…and screw you in the process, line their own pockets and gain more political power…

You want Euro style govenance? It’s headed in that direction, don’t do anything, it will work all by itself.

RoxanneH on September 20, 2010 at 10:31 AM

Play acting by the jivemaster.

tarpon on September 20, 2010 at 10:31 AM

Congress passed a massive expansion of regulation on Wall Street at the beginning of summer

….

Brown FTW!

artist on September 20, 2010 at 10:36 AM

If we punish, punish, punish and punish investors some more, they’re sure to create jobs!

It’s just GOTTA work!

mankai on September 20, 2010 at 10:36 AM

Everyone is waiting to see what happens in November, waiting to see what Obama and the democrats do next, waiting for the next two years to get over with, waiting for the GOP to get a clue, waiting….waiting…

Trust me, this is not a winning strategy, I’ve been waiting all my life, and now I’m waiting to die. Lord, I’m tired of waiting.

Skandia Recluse on September 20, 2010 at 10:38 AM

We’d better make sure Coons wins and that nut O’Donnell doesn’t get into the august US Senate… he’s smart enough to understand these “regulatory reform” bills… she might just be too common and vote against really complicated, Ivy League stuff like that.

mankai on September 20, 2010 at 10:39 AM

Strange world. The US losing her financial edge and the Russians seeing the light on what too much bureaucracy does to a country:

http://news.ph.msn.com/business/article.aspx?cp-documentid=4346459

Russia canning 100,000 bureaucrats over the next 3 years.

journeyintothewhirlwind on September 20, 2010 at 10:39 AM

Unintended consequences.

Bruce MacMahon on September 20, 2010 at 10:40 AM

Six more weeks and then the dominos begin to fall.

Note to Biden: No, this doesn’t mean all the pizza shops will go out of business.

fogw on September 20, 2010 at 10:42 AM

Democrats Republicans so far have been different in degrees not in substance…Yes the Democrats are a LOT more evil. But that doesn’t make the Republicans the good guys. They went merrily along with most of the crap that has buried us.

This isn’t about Republicans vs Democrats this is about both of them vs the people.

PierreLegrand on September 20, 2010 at 10:43 AM

Let’s not forget: Elizabeth “Nit Wit” Warren is just firing up the engines of Obama’s new fancy schmancy consumer finance protection agency. What could go wrong?

BuckeyeSam on September 20, 2010 at 10:43 AM

So how many jobs did Obama “save” in the investment industry?

albill on September 20, 2010 at 10:46 AM

However, the action by Congress this year was punitive in nature, and in any case didn’t address the actual root cause of the collapse, which was the social engineering conducted by Congress itself in the housing markets through Fannie Mae and Freddie Mac.

But, but, but “creative” financial wizards Maxine Waters and Barney Frank assured us that Franklin Raines was the cat’s meow.

I am most frosted by the appointment (without the vetting and Congressional approval) of Elizabeth Warren to serve as czarina of the finance bill provisions. She answers to no one but Geithner–What a confidence builder!

onlineanalyst on September 20, 2010 at 10:48 AM

Let’s not forget: Elizabeth “Nit Wit” Warren is just firing up the engines of Obama’s new fancy schmancy consumer finance protection agency. What could go wrong?

BuckeyeSam on September 20, 2010 at 10:43 AM

I suspect that the whole point of appointing her, make as much mischief as possible.

Johnnyreb on September 20, 2010 at 10:49 AM

Six more weeks and then the dominos begin to fall.

Note to Biden: No, this doesn’t mean all the pizza shops will go out of business.

fogw on September 20, 2010 at 10:42 AM

Too late…

Biden announces: Dominoes Pizza too big to fail, supports bailout and new “green” pizza program.

mankai on September 20, 2010 at 10:49 AM

World renowned economist Paul Krugman could not be reached for comment.

Rovin on September 20, 2010 at 10:51 AM

The beatings will continue until the private sector starts hiring.
White House Press Release

bloviator on September 20, 2010 at 10:52 AM

What’s the problem, all is going according to plan.

booter on September 20, 2010 at 10:53 AM

I keep having this nagging thought that Wall Street Democrats are propping up the numbers because they don’t want to see Obama fail and that they are making risky investments that they wouldn’t have made if those same numbers were seen under Bush/another Rep. That all it will take is one popular investor to see the light and the whole house of cards falls.

journeyintothewhirlwind on September 20, 2010 at 10:58 AM

Biden announces: Dominoes Pizza too big to fail, supports bailout and new “green” pizza program.

mankai on September 20, 2010 at 10:49 AM

Dumpster divers foresee “primo” business opportunity.

ya2daup on September 20, 2010 at 11:00 AM

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.

Pretty much every NY corporate associate I’ve talked to in the last year or so (especially those in M&A) say they’ve been swamped. Granted, that’s partially due to the fact that firms are thinly staffed after the layoffs of 08 and 09 but still, they’ve all said things have been picking up. Looks like they’re going to be slowing down again in the near future. Reason #9457 to do litigation rather than corporate nowadays.

Same with my friends in i-banking. They said things have been crazy.

crr6 on September 20, 2010 at 11:02 AM

I keep having this nagging thought that Wall Street Democrats are propping up the numbers because they don’t want to see Obama fail and that they are making risky investments that they wouldn’t have made if those same numbers were seen under Bush/another Rep. That all it will take is one popular investor to see the light and the whole house of cards falls.

journeyintothewhirlwind on September 20, 2010 at 10:58 AM

Since we have a fiat currency, its all fake anyway. The “Economic indicators” are pure BS. When there is no underlying asset to base the currency on, how can you say the currency is losing or gaining value?

BTW, that’s what happened in the mortgage fiasco. Wall Street was trading securities that had no underlying asset, and all it took was one player to trip up. Enter Lehman Bros. They couldn’t find a chair when the music stopped.

House.Cards.Fail.

BobMbx on September 20, 2010 at 11:04 AM

I hereby sentence you to be hanged by the neck until you cheer up!

yubley on September 20, 2010 at 11:15 AM

Same with my friends
crr6 on September 20, 2010 at 11:02 AM

.
.
I call BS, there are circus freaks with higher standards.
Until you can prove you have them, and they agree to such a lowly state, you should refrain from using the term ‘friends” about anyone.

LincolntheHun on September 20, 2010 at 11:19 AM

crr6 on September 20, 2010 at 11:02 AM

Hummm, my friends in NYC says things are starting to look bad. The bulge banks are doing ipos for very questionable companies. Basically, there’s no company to sh***y to go public, ie the banks are desperate for revenue. As for my friends in funds, the last round of hiring in the spring was based on a recovery; that’s questionable now and some layoffs are starting. The legal field is such an utter disaster that even in a full recovery it still won’t do well except for the top partners.

TimTebowSavesAmerica on September 20, 2010 at 11:21 AM

This is good news.

When we can finally rid this country of nasty evils such as “investment capital” and “profits” the unicorns will finally be free.

mankai on September 20, 2010 at 11:30 AM

http://www.youtube.com/watch?v=wxlhyX-4qKI

Abby Adams on September 20, 2010 at 10:41 AM

I was going to ask where the Louis Renault clip was, but that’s funnier.

EnglishMike on September 20, 2010 at 11:32 AM

The NYT’s is going to be even more shocked when it tries to borrow money again. And is DENIED.

GarandFan on September 20, 2010 at 11:35 AM

Always a pretty good reference for yall econo-types:

Market Ticker

Katfish on September 20, 2010 at 11:48 AM

Twenty years ago, who would have ever thought that the British would kick our butts by offering a reletively low-tax, high innovation environment for business? The freekin’ British!

You know you’re in sad shape when those wankers eat your lunch…

Haiku Guy on September 20, 2010 at 11:52 AM

The failed policies of the Bush Administration are now replaced by the even worse failed policies of the Obama Administration.

From the pan to the fire

J_Crater on September 20, 2010 at 11:56 AM

Wait til the govt takes over our ira’s and 401k’s to invest in govt bonds. Business won’t be able to sell stocks which raises capital for them to grow and hire. Seems there’s a plan afoot in GB to just take everyone’s paycheck and give them a dole to live on. No report from WH that it is studying this move.

Kissmygrits on September 20, 2010 at 12:04 PM

The Tea Partier’s will be making a grave mistake if they don’t call Wall Street on it’s nonsense.

They not only should scream bloody murder at the bailout of AIG, Bank of America, and the lack of regulation of their risky business that lead to the problem.  They should be calling out the banks for taking the bailout and then making sure no one else is getting any as they’ve nearly frozen lending money to their customers and, after the upper management layer took their cut, turned much of what was left over to their high-risk traders to churn-and-earn or churn-and-burn, and put the rest in US Treasuries.

rickyricardo on September 20, 2010 at 12:14 PM

Of course you all know it was Booooosh’s fault./s

DDT on September 20, 2010 at 12:37 PM

O/T: Can we go back to HA pages that don’t have LOUD commercial advertisiements that autoplay?!? PLEASE? Geez louise.

Now back to the topic… where is our Capt Renault Award video?!

Califemme on September 20, 2010 at 12:43 PM

O/T: Can we go back to HA pages that don’t have LOUD commercial advertisiements that autoplay?!? PLEASE? Geez louise.

Now back to the topic… where is our Capt Renault Award video?!

Califemme on September 20, 2010 at 12:43 PM

FireFox has a plugin that eliminates the auto-play problem.

Who is John Galt on September 20, 2010 at 12:50 PM

FireFox has a plugin that eliminates the auto-play problem.

Who is John Galt on September 20, 2010 at 12:50 PM

It must be working, because I use Firefox & I’ve never heard anything like that here.

itsnotaboutme on September 20, 2010 at 1:03 PM

Haiku Guy on September 20, 2010 at 11:52 AM

You must not have seen the article on Drudge yet about the British Taxing authority making the suggestion that businesses send everyones’ pay to the government first, and then they would give you back whatever they haven’t taken….

journeyintothewhirlwind on September 20, 2010 at 1:22 PM

I know what I have to say isn’t sexy. It’s not the pointless joy of arguing gay marriage or the Delaware Senate race. Still we need to repeal Sarbannes-Oaxley as soon as possible, if we want a vibrant economy. I’m sorry to have to post about something as boring as accounting rules, but they really do matter! Sarbannes-Oaxley saps the strength of start-up firms. It’s more terrible in economic effect than if the Democrats refuse to renew the Bush tax cuts. I wish there some sexy way I could sell this idea, yet I know I will be ignored even here in an audience most favorable to discussing this issue.

thuja on September 20, 2010 at 1:52 PM

If they’re shocked at the summer ‘recovery’, with the recession officially over since last summer, a la WH, wait until the see this Fall.

Schadenfreude on September 20, 2010 at 1:57 PM

Volumes are down because people are siting tight. Not because of additional regulations passed recently.

lexhamfox on September 20, 2010 at 2:03 PM

However, the action by Congress this year was punitive in nature, and in any case didn’t address the actual root cause of the collapse, which was the social engineering conducted by Congress itself in the housing markets through Fannie Mae and Freddie Mac.

Ed, I can’t believe that you’re still recycling this religious belief. You’d be hard pressed to find anyone of consequence on Wall Street to agree with your burning desire to blame government ‘social engineering’ for the economic crisis, and that includes a lot of conservatives. The same applies to top people in the mortgage banking industry (many of whom have blogged about the fallacy of your belief). Greenspan doesn’t buy it either. You’re out in left field on this one and don’t seem to have a very ‘academic’ understanding of how the system was fatally flawed.

bayam on September 20, 2010 at 3:52 PM

thuja on September 20, 2010 at 1:52 PM

This is actually the GOP’s fault. There was a proposal to exempt small cap from SARBOX, but Chris Cox, formally of Orange County, said no way. It could’ve been done during Bush but Donaldson and Cox prevented it. You’ll need three strong conservatives at the SEC to accomplish this.

TimTebowSavesAmerica on September 20, 2010 at 4:39 PM

bayam

I work on Wall Street and it is hardly a “religious belief” that the incentive system set up by the government for MBS created a moral hazard, though people disagree about how big a factor it was. One reason that many higher ups don’t point the finger at the government is because there’s no upside to doing so. Publicly calling out the excesses of government happens only in the movies.

shazbat on September 20, 2010 at 10:45 PM

UNEXPECTED

LOL.

Dandapani on September 26, 2010 at 9:37 PM