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Tuesday, 9 November 2010

Be nice, begs Wall Street

NEW YORK - The captains of Wall Street yesterday begged regulators to cushion the blow from a sweeping regulatory reform Bill that is expected to squeeze profits from some of their most lucrative franchises.

Two years after a severe credit crisis that was in large part of their own making, top financiers met yesterday at a conference held by their lead lobbying group where they vowed to help "shape" reforms still being hammered out.

Morgan Stanley CEO James Gorman complained at the annual meeting of the Securities Industry and Financial Markets Association (Sifma) about polarising anti-Wall Street "rhetoric".

Sifma represents hundreds of securities firms, banks and asset managers, including Morgan Stanley, JPMorgan Chase, Goldman Sachs and Bank of America.

Just days after an election handed Republicans control of the House of Representatives, Mr Gorman appealed to the public to give markets more time to recover.

"The financial system nearly shut down. It's only two years on. You need a little bit of patience to rebuild, to accumulate the capital you need," he said.

The giants of US finance are still finding their footing after the 2007-2009 crisis that shook the world financial order, tipped the US economy into a deep recession and ushered in a global move toward stricter oversight, he argued.

Another senior banker at the event blamed lax mortgage lending for a housing market crash that he called "avoidable". Said Bank of New York Mellon CEO Robert Kelly: "We need good national standards for mortgage underwriting. The banks should own 50 per cent of the paper, with the other half sold through a privatised securitization process."

US President Barack Obama in July signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, imposing tough new rules for banks and financial firms. These are being put into practice now by regulators under tight deadlines.

Republicans who won control of the House have vowed to try to soften parts of Dodd-Frank, but face an uphill climb against a continued Democratic majority in the Senate.

Sifma president Tim Ryan said his group wants to help flesh out the "Volcker rule" in Dodd-Frank on risky bank trading. The rule curbs "proprietary trading" by banks; limits their involvement with hedge and private equity funds; and caps domestic expansion by the largest banks.

"The important aspect of this set of rulemaking will be how regulators define what activities are deemed 'proprietary' and thus prohibited," he said. "Our focus here is to help Treasury determine what qualifies as proprietary trading." REUTERS

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