Now that the bill on financial reform is ready, the general consensus appears to be that banks have evaded the most onerous measures. I think that view is right, as far as it goes, but the ultimate cost of regulation could still significantly exceed current estimates. Here's why.

A victory lap before the race is over?
So confident were the largest banks that the impact of the final reform package would be contained, that they recently began taunting lawmakers. Citigroup (NYSE: C) made plans to raise $3 billion for internal hedge funds and private equity funds. Meanwhile, JPMorgan Chase (NYSE: JPM) was reportedly in advanced talks to acquire a large Brazilian hedge fund/private equity group. Both went against the spirit of the "Volcker rule," part of the reform package that seeks to limit commercial banks' involvement in activities that are perceived as higher risk.

While the final bill has been watered down, regulators will still have enormous discretion in deciding how to implement the new laws. To wit: How much and what kind of capital must banks hold? What falls under proprietary trading? These and other questions must be answered by regulators, who are under pressure to prove they can get tough with the banks.

Regulatory uncertainty remains: lawmakers out, regulators in
In sum, regulatory uncertainty persists until the details are hammered out -- albeit within a framework that is now better defined. The bank with the largest exposure to the overhaul is Goldman Sachs (NYSE: GS); proprietary trading accounts for 10% of its revenues, for example. Its nearest counterpart, Morgan Stanley (NYSE: MS) had already begun to reduce the size of its own account trading.

Are they cheap enough?
All the same, the valuations of these five banks (including Bank of America (NYSE: BAC)) appear to offer some compensation for bearing this remaining uncertainty: At just 1.1 times book value, Goldman's stock is the most expensive of the group. Although I'm not a huge fan of this sector (particularly investment banks), I think there are decent odds that this group will outperform the broader market over the next two to three years -- but don't expect a smooth ride.

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Fool contributor Alex Dumortier has no beneficial interest in any of the stocks mentioned in this article. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.