Regulation madness

How Wall St. 'fixes' kill jobs

By CHARLES GASPARINO

Bank of America’s announcement of up to 30,000 layoffs over the new few years is finally bringing some attention to the jobs-killing cost of rotten laws like last year’s Dodd-Frank financial “reform.” The problem’s only grown since I last wrote about it (“Wall Street Jobs Exodus,” June 30), and it’s likely to get worse.

Consider what Dodd-Frank fans will point to as the “real” reason that BofA’s shares are falling scarily close to penny-stock territory and its CEO Brian Moynihan is cutting all those jobs: the bank’s ill-advised 2008 purchase of Countrywide Financial.

The home lender had sold tens of billions of dollars in subprime mortgages held by investors who BofA might soon have to make whole. But a good part of what turned buying Countrywide into such a misstep is coming from politics.

A group of state attorneys general are trying to extort some $20 billion from the big banks because of what amounts to paperwork errors in the mortgage foreclosure process. The vast majority of the people thrown out of their homes “illegally” (according to the government ambulance chasers) were far and away delinquent on their loans. But the state AGs see a pot of gold sitting in the vaults of JP Morgan, Citigroup and BofA -- and they’re intent on grabbing every dime they can.

So, too, are the wonderful federal regulators who failed to stop the mindless risk-taking that has put Fannie Mae and Freddie Mac deeply underwater; now the feds are suing the banks for “deceiving” Fannie and Freddie into buying the dubious loans that Washington was demanding be made.

Plus, in the old days, banks could be expected to grow their way out of massive liabilities like the one Countrywide now presents BofA. No longer. Massive new regulation (both home-grown and from abroad) is pushing the industry to the brink.

Yes, the financial industry needed reform, but Dodd-Frank didn’t make the key change -- an unmistakable end to “Too Big to Fail.” As long as the big banks think the feds will bail them out whenever they get in trouble, they’ll keep taking big risks and eventually blow up, putting the country right back into financial crisis á la 2008.

Instead, Dodd-Frank dumped tons of new rules on banking businesses that had little or nothing to do with Wall Street’s bad risks back then. Its bans or places restrictions on such practices as proprietary trading (in which firms make money by taking bets in the markets) or the creation and sale of derivatives that have cut deep into the banks’ profits -- forcing them to slash costs through, among other things, layoffs.

Some are quiet about it, like Goldman Sachs’ silent shift of jobs to Singapore and India. Others are louder. As he plans US job cuts and outsourcing, JP Morgan chief Jamie Dimon has gone public with his gripes, confronting Federal Reserve chief Ben Bernanke months ago, and more recently making a similar critique about new global rules.

The bigger problem is that all this has the banks cutting back on business lending. Small, startup businesses -- which need the capital the most -- are getting the biggest shaft, but they’re not alone.

Fees on the banks’ consumer products are headed higher, too -- that’s the only way the banks can continue to turn a profit on those services under the exploding regulations.

It all means fewer jobs. Just ask Brian Moynihan.

Charles Gasparino is a Fox Business Network senior correspondent.