Why is Goldman Sachs pre paring to outsource traders, salespeople and investment bankers from here in America, where it has made untold billions over the years as Wall Street's premier trading firm, to places like Singapore and India?
The answer can be found largely in the 2,000-plus pages of last year's Dodd-Frank financial "reform" law -- which will eventually translate into some 40,000 pages of regulations. The financial industry is still frozen, waiting to find out how bad these regs will turn out; but what all the CEOs of the big banks know for sure is that it's about to get a lot more expensive to do business here.
The only real question is by how much more expensive. And the banks aren't sitting around to find out.
Of course, the slowdown that's crimping Wall Street profits is a factor in banks' frenzy to cut costs by eliminating US jobs while expanding in lower-cost places overseas. But they'd expect the business environment to get better eventually -- if the regulatory environment weren't sure to get worse.
Then-Sen. Chris Dodd, Rep. Barney Frank and President Obama all said that they pushed for regulatory reform to prevent another financial meltdown. But their legacy may well be the decimation of the US financial-services industry, which for all its bailouts, blunders and other ills pumped billions upon billions into the economy over the years, especially here in New York.
It's not just Goldman, which wants to expand a once-tiny Singapore office by hiring 1,000 executives while it contemplates a major job reduction at home. (Yesterday, Goldman told the labor department it's cutting at least 230 jobs.) Just about every major US bank is looking at outsourcing as a way to pay for the new costs of doing business as regulators hammer out new rules.
JP Morgan chief Jamie Dimon recently lambasted Fed Chairman Ben Bernanke, saying the prolonged uncertainty over the Dodd-Frank regulations is making it difficult for his bank to lend money to small businesses to help grow the economy. What he didn't say during his mini-tirade is how much his bank is committed to growing outside America to keep pace with competitors like Citigroup, Bank of America, Morgan Stanley and Goldman.
"Everyone is screaming that the money is now overseas," said veteran market analyst Richard Bove. "Well it's overseas in American banks. What we are seeing is an escape from US regulation."
The biggest irony is that Wall Street has long been the engine financing the New York welfare state -- yet it's being squeezed by lefty politicians who believe in expanding the national welfare state. The winners are places with well-educated, English-speaking workforces plus lower taxes and less regulation -- in Goldman's case, Singapore and India.
These same people also claim the mountain of new regs will prevent another banking collapse. But regulations didn't do the job in 2008 and won't in the future. Dodd-Frank fails to get at the root of the problem: Banks were bailed out so many times in the past, they came to expect it -- and so they took on ever-greater risks while chasing ever-greater profits, until some players' huge bad bets were enough to take everybody down.
Of course, the banks expected some response to that mindless risk-taking. But the monstrosity of Dodd-Frank is that it doesn't touch the real problem -- even as it squeezes profit margins and sends jobs overseas.
Charles Gasparino is a Fox Business Network senior correspondent.
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