The Beginning of the End for Wall Street

WASHINGTON (TheStreet) -- As Congress enters conference negotiations to come up with a final version of a controversial financial reform bill today, folks on Wall Street and Washington alike have indicated that it's unlikely to emerge quite as tough as it once seemed.

Still, it's undeniable that over the next couple of years, the U.S. banking industry will become smaller, safer and more confined than it has been in decades.

"I will tell you that we're now facing a new paradigm in the banking industry," says Harley Lance Kaplan, a financial adviser with Beta Industries. The dramatic turn to harsh regulation, after a long period of de-regulation comes "as a result of the banks' vertical integration into different businesses - lending and brokerage and hedge-fund management, all the things they've been able to do because of the Glass Steagall Act," he adds.

Or, as veteran bank analyst Nancy Bush puts it: "Wall Street is over."

"At least the Wall Street that had existed since 1982," she continues, "the year that the latest and greatest Bull Market of All Time began and the year that I first came into the business."

Their sentiments reflect the reality of the 2010 finreg bill, even if bankers and analysts are still trying to paint silver linings among the clouds. The initial bill crafted by Sen. Chris Dodd (D., Conn.) was thought to be harsh on its own. Broadly speaking, it had strong consumer protection measures, new powers to rein in big banks, new delegation of those powers and derivative regulation for the first time.

But the most worrisome measures for the financial industry have come instead from a handful of the more than 300 amendments that were added to secure votes for the bill's passage.

Sens. Richard Durbin (D., Ill.), Blanche Lincoln (D., Ark.), Susan Collins (R., Maine), Jeff Merkley (D., Ore.) and Carl Levin (D., Mich.) have added four provisions that have particularly frightened the pants off of management at banks large and small.

Durbin's interchange amendment threatens to cap the billions of dollars in fees that payment processors and credit/debit-card issuers receive from merchants that accept plastic. It would cut into the bottom line for Bank of America (BAC), JPMorgan Chase (JPM), Citigroup, Capital One (COF), American Express (AXP) and Discover (DFS). In a sign of just how much the rule could affect the system, Wells Fargo (WFC) - which has relatively little exposure to cards - has joined the industry in lobbying against changes as well.