For example, as JPMorgan (and other megabanks) move away from student lending, smaller banks will undoubtedly step up to serve the student lending market, and it may increase the bottom line, but not overall margins.
Philip van Doorn makes the argument that leaving lower-margin "safe" loans increases the overall risk banks face because of diminished diversification. I don't necessarily disagree with him, but from an investor's point of view, the risk isn't squarely on the shoulders of investors anymore.
As long as the banks are considered systemically crucial to the financial health of the country/world, not only can they increase their portfolio risk profile, they
do so for the same reasons investors should buy shares, namely "heads JPMorgan Chase wins and increases profits, or tails the loans don't perform, the government injects liquidity, and JPMorgan Chase breaks even.
The result may not be the original desired goal of regulators; however, as investors we want to play the hand we're dealt, and JPMorgan is a superb hand.
At the time of publication, Weinstein had no positions in stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.