This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Still Waiting for Post Crisis Banking: Street Whispers

NEW YORK ( TheStreet) -- More than two years after the passage of Dodd-Frank and more than four after the collapse of Lehman Brothers, fundamental questions remain about what the largest U.S. financial institutions will look like in the post crisis era.

The latest evidence of the uncertainty comes from Morgan Stanley (MS - Get Report), which has been shopping its once-revered commodities trading business for several months, according to several news reports and a former manager in the unit. While CNBC reported in July that a 15% stake sale was being discussed with the Qatar Investment Authority, reports last week in the Financial Times and Reuters indicated a larger stake sale--or maybe even a sale of the entire unit-- was being discussed, though Reuters added that the talks had run into difficulties.

A key issue, according to the Reuters report, is whether the Federal Reserve will allow banks to keep physical commodities and acquire new ones to complement their trading businesses. Goldman Sachs (GS - Get Report) and JPMorgan Chase (JPM - Get Report) also possess large holdings of physical as well as financial commodities assets.

A report from Bernstein Research analyst Brad Hintz on Friday argued that if Morgan Stanley were to exit the business, it could create an opportunity for Goldman.

"Goldman Sachs has said on numerous occasions that its trading operations should benefit as others pull back from portions of the market, pricing adjusts and market shares shift - this may be the first such retreat," Hintz wrote.

But commodities trading isn't the only instance where new rules are forcing some players out of businesses they had dominated while leaving others behind to gain still larger share. A similar phenomenon is occurring with mortgage servicing, where Bank of America (BAC) Citigroup (C - Get Report) and JPMorgan are retreating from the business due to stricter capital rules that make it less profitable, while Wells Fargo (WFC - Get Report) has decided it will capitalize on the opportunity to gain share despite the higher costs of staying in the business.

Pay is another area where clearly much has still to be determined. Though companies and analysts have been saying for some time that compensation has to move lower, Morgan Stanley remains under pressure from shareholders to do more, according to Reuters, and CEO James Gorman told the Financial Times Friday he plans to be more aggressive in slashing compensation.

But this isn't the first time Gorman has made these types of comments , and investors apparently still aren't satisfied.

Has Wall Street really changed in the wake of the crisis? One senses the biggest changes are still to come.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
C $51.56 -0.17%
JPM $62.14 0.02%
GS $180.12 -0.52%
MS $32.89 -0.30%
WFC $52.56 0.04%


Chart of I:DJI
DOW 17,103.46 +52.71 0.31%
S&P 500 2,013.43 +15.91 0.80%
NASDAQ 4,836.8730 +26.0850 0.54%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs