It�s likely that some financial stocks, including Goldman Sachs (GS), will remain in a state of purgatory since President Barack Obama has indicated he will try to increase regulatory pressures on banks to limit risk taking.
Obama does not want banks to use customer deposits to fund proprietary trading and other sophisticated enterprises that appear to be unduly risky.
Naturally, the financial sector declined in reaction to the President’s threats, and Wall Street traders once more showed that while they can understand every nuance of finance, they barely get politics.
As the President rattled his saber, the Supreme Court overturned limits on how much money corporations can spend to support political campaigns.
Unless something miraculous has happened, and Congress has overnight become virtuous, statesmanlike, and not the least bit concerned about re-election, the President’s threatened measures are likely to be severely diluted.
Money is oxygen to politicians, and it now appears that the Supreme Court might be more pro-business than understood. The amount of money congressmen need, or want, for their reelection campaigns, or leadership PACs, is often considered chump change on the Street.
With one email, Wall Street firms can raise tons of cash. Who has the most cash? Big banks with proprietary trading operations. Ditto for hedge funds. The smart bet in the Obama vs. Wall Street battle? Wall Street. Sure, it will be an ugly fight, but the President is putting Wall Street firms into a corner, and they will attack. The trick will be to fight without further exacerbating populist ire.
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