Add Morgan Stanley to the list of big banks whose executives said they benefited from Dodd-Frank and the concomitant regulations. Morgan Stanley CFO Ruth Porat said this on an earnings call last week:
That second part, where she says Morgan Stanley differentiated itself by embracing regulations might be true in some specific regards, but not in general. Here are some of her colleagues:
Jamie Dimon, JPMorgan
In Dimon’s eyes, higher capital rules, Volcker, and OTC derivative reforms longer-term make it more expensive and tend to make it tougher for smaller players to enter the market, effectively widening JPM’s “moat.” While there will be some drags on profitability — as prices and margins narrow, efficient scale players like JPM should eventually be able to gain market share.
Lloyd Blankfein, Goldman Sachs
In 2010: “We will be among the biggest beneficiaries of reform.”
And then in 2015: “More intense regulatory and technology requirements have raised the barriers to entry higher than at any other time in modern history….This is an expensive business to be in, if you don’t have the market share in scale. Consider the numerous business exits that have been announced by our peers as they reassessed their competitive positioning and relative returns.”
Robert Benmosche, AIG
Good Housekeeping Seal of Approval
Along these lines, check out this Columbia Business Times piece on the worry that Dodd-Frank will crush small banks, or the Treasury official in 2011 who told Newsweek the law would turn the big banks into quasi-governmental agencies:
And this study that suggested “economies of scale when dealing with regulation” and one-size-fits-all rules are creating a market in which the big guys face less competition.
