Let's have a show of hands. Is anybody out there really expecting financial reform? Does anybody think that the legislation just hammered out in Congress is going to have a measurable impact on the problems that led to the worst financial crisis since the Great Depression? Hmm ... let's see. Peering through the computer, I see absolutely no one raising a hand. That's what I expected. Well, guess what? You're wrong. Financial reform has arrived. And let me tell you, this is good news. All the big banks that you'd expect to fear financial reform -- from the ever-popular Goldman Sachs ( GS) to Citigroup ( C), JPMorgan Chase ( JPM), Morgan Stanley ( MS) and Bank of America ( BAC) -- all can breathe a sigh of relief. As best as I can tell from the reports out of Washington, they're about to be beneficiaries of the kind of reform they enjoy the most: Reform, Washington Style. Oh sure, they're not totally in the high cotton. A watered-down version of the Volcker Rule, imposing restrictions on bank proprietary trading, emerged from the congressional Cuisinart. That proposed new consumer protection agency, under the consumer-loving aegis of the Federal Reserve, looks like it hasn't been completely emasculated, and it may inconvenience some lenders. Derivatives may become just a little bit less of a Wild West. After all, you can't very well expect financial reform that doesn't have any reform component whatsoever. But overall, I'd say that the big banks, the not-so-big banks, and even the auto dealers, pawnshops, payday lenders and street corner loan sharks are out of the woods. No wonder the bank stocks rallied when the financial reform bill was finally hammered out on Friday. See, it's all a question of how you define "reform." Most people who aren't Hill-savvy define reform the old-fashioned way. When I was a kid in the Bronx, we used to have something up there called "Reform Democrats" who always wanted to kick out the "Machine Democrats" like the unlovable old crook, Boss Charlie Buckley. Reform meant "get the bums out." As defined by the dictionary, reform is the improvement or amendment of what is wrong, corrupt, unsatisfactory, etc. But as used in Congress, it means the degrading or weakening and the making of something more wrong, more corrupt, more unsatisfactory, or maybe just doing nothing at all and making believe it's reform. Using the latter definition of the term, there's plenty of financial reform going on in Washington, and has been for some years.
Steve Ricchiuto, MZUHO Securities chief economist, and Bob Michele asset management global CIO with JP Morgan (JPM), joined BloomberTV's 'Bloomberg GO' to discuss the economy and the Fed raising rates.