By Jeff Cox, CNBC.com Staff Writer
Weep not for Wall Street: Even though the nation's big financial institutions will get hit by the new financial reform regulations, they already have begun figuring out ways around them and are setting the path for more profitability in the future. Analysts who feared the new rules might cripple the backbone of the American financial system have relented since President Obama signed the Dodd-Frank reforms into law last week. The new law establishes tighter requirements for capital and restricts risk-taking. It also contains a significant consumer watchdog component and seeks to prohibit banks from becoming too big to fail. But crafty financial veterans are already finding loopholes in the law and banks likely will profit both in spite of and because of the reforms. "What the law did was force the banks to rethink their business lines, their pricing strategies, their methodology for maintaining their balance sheet," banking analyst Dick Bove of Rochdale Securities said in an interview. "When they rethink it all, they will be able to offset all of the costs of this bill." The banks' course of action likely will break down into four strategies: 1. Outfox the Foxes A harsh critic of the law, Bove is among the analysts who nevertheless believe banks will thrive. One big reason is because he thinks industry executives will show that they're smarter than the legislators who crafted financial reform, also known as FinReg. "If you had anyone who knew anything about the financial industry writing this law, that's one thing," said Bove, who has called the law one of the worst in US history. "But if you have a bunch of hysterics who were looking for political gain, you get something that was an abortion. All it did was increase the cost of banking in the United States relative to the cost of banking in other countries." One of the loopholes will be challenging the government to decide what is "proprietary trading." Normally considered that trading which institutions do for their own benefit rather than their customers, observers have speculated the government will have a tough time enforcing an exact definition.