NEW YORK ( TheStreet) -- Considering that banks face new legislation expected to put limits on their private equity and hedge fund investing activities, they aren't exactly racing for the exits.

True, Morgan Stanley ( MS) has parted company with the heads of its private equity and hedge fund businesses, according to The Wall Street Journal, but a person close to the situation at Morgan Stanley says the departures have more to do with a re-tooling of the businesses under Morgan Stanley Investment Management President Greg Fleming, who joined the company in February, than they do with the legislation.

The person tells me that Morgan Stanley "remains committed" to its private equity and hedge fund businesses.

What about the so-called "Volcker Rule"-- the part of the proposed Dodd-Frank Wall Street Reform and Consumer Protection Act--that limits those activities, I ask.

Yes, yes of course, within the limits of the legislation, this person tells me.

Similarly, Citigroup ( C) confirmed reports it is exiting certain private equity investments, but the manner it is choosing to do so is extremely complicated. It sounds more like a breakup between Elizabeth Taylor and Richard Burton than an actual deal.

Citigroup does not say it is selling the funds in question, which include "its fund of funds, mezzanine funds, feeder funds and co-investment businesses," according to a press release issued Tuesday morning. Instead, the bank is "transferring the management and certain proprietary interests" in the funds, the release states. It goes on to note that "Citi will retain its management of, and certain proprietary interests in, its employee funds," and that the "transaction does not impact Citi Capital Advisors," a separate Citigroup private equity unit.

In other words, Citigroup is still hanging around the private equity business, and it may be that these transactions would have gone ahead as currently planned even without the legislation. Citigroup had already designated the private equity funds in the deal to be part of Citi Holdings, a roughly $500 billion pool of assets slated for sale or runoff, long before it was clear the Volcker rule would become law.

Private equity and hedge fund executives outside the big banks tell me that what Citigroup, Morgan Stanley, Bank of America ( BAC) or JPMorgan Chase ( JPM) do or don't do in those areas doesn't matter much, as they have already whittled down those businesses to a size that barely makes a difference.

The only exception is Goldman Sachs ( GS), which still has large proprietary investment businesses.

Whatever Citigroup and Morgan Stanley are doing, however, it is not nearly so simple as Paul Volcker, the former Fed Chairman and advisor to President Obama after whom the Volcker rule is named, would like it to be.

-- 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.

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