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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Deal: Post-Lehman Wall Street Remains Gun-Shy

More immediately, however, Quintanilla warned that the industry's profitability had peaked and was vulnerable to rising interest rates.

Some bankers said they believe that the pendulum has swung too much.

"Before the crisis, we had gone too far in terms of risk taking and there was an agency [responsibility] problem where a bank may originate an ugly mortgage asset," said Wells Fargo managing director of financial institutions, Brian Moon. "But if others were willing to buy it, buyer beware."

But Moon said markets need liquidity and capital leverage for optimal functioning, and with that circumstance comes inherent risk. That mentality is missing now.

"If banks are forced to keep so much capital that they can't effectively lend money, then we have moved too far," he continued.

Indeed, in a Sept. 17 memo leaked on the Internet, JPMorgan CEO Jamie Dimon outlined for the bank's staff the company's approach to ongoing regulatory disputes: simplify its business and bulk up on risk and compliance staff.

The aversion to risk and flight from high-return businesses has led banks' return on equity to nosedive. Before Lehman collapsed, ROEs for investment banks were 15% to 20%. Post-crisis, large bank ROEs are only in the high single digits.

Former CFO at Lehman and now a senior analyst at Sanford Bernstein & Co., Brad Hintz, noted that while the "easy answer" to new regulation may be to reduce or exit capital intensive businesses, the fixed costs of re-entering a trading business will be "very high."

Hintz conceded the near-term outlook for ROEs is difficult but remains optimistic on the long-term prospects for investment banks, noting their adaptive nature to client demands, market dynamics and regulatory developments.

-- Written by Jane Searle in New York

3 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,086.63 -26.91 -0.16%
S&P 500 1,987.01 +3.48 0.18%
NASDAQ 4,473.6970 +17.6810 0.40%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs