Although President Obama wasted no time crowing over the fact that the Senate passed its financial reform bill Thursday, several Wall Street executives feel that all is still to play for, as the House and the Senate bills are merged and go through conference.
Of particular concern is the proposal that requires firms to spin-off their derivatives businesses.
The Financial Times quotes Conrad Voldstad, CEO of ISDA, who said: 'This provision could have tremendous unintended adverse consequences for the financial system, and lead to significant market disruptions and a drain on bank capital'.
And The New York Post quotes Ken Bentsen, EVP at the Securities Industry Financial Markets Association, who has said: 'We're very supportive of the work that has been done to stabilize the financial markets, but this provision to force banks to push out their derivatives operations is a really bad idea that has the unintended consequence of increasing costs for consumers and increasing risks within the banks'. Bloomberg also quotes Robert Litan, VP of Research and Policy at the Kauffman Foundation, who said: 'There's a reasonable chance it will remain only because anti-bank sentiment has increased' (and not because it's the right thing to do).
There's also concern that the new legislation, which will mean that big banks will have to increase their capital base, will result in downgrades from the credit ratings companies. Bloomberg quotes William Fitzpatrick, a financial analyst at Optique Capital Management, who said: 'This will likely be one more overhang that will play out later. We need to let things shake out first in terms of seeing just how damaging regulatory reform is to the funding costs of the large banks'.
But the last word goes to the unnamed 'senior Wall Street executive' quoted in The Financial Times, who said: 'This is all to play for. Nothing is done until the President signs it into law'.