The U.S. Senate passed financial regulation yesterday, leaving just a presidential signature to transform bill to law. To be sure, the push to passage has been less titillating than Mel Gibson's ongoing series of vitriolic rants.
The highlights (on financial regulation, not Mel Gibson) include a council of regulators to monitor firms for financial system risk, extended derivatives regulation, limits on propriety trading, and a mechanism for liquidating large institutions whose collapse would threaten the economy.
Despite widespread criticism of the bill, some on Wall Street are warming to the idea. Goldman Sachs
But that's looking longer term. In the short term, regulatory costs will increase for everyone, but disproportionately. According to JPMorgan Chase
I suspect much of that business will be gained from smaller competitors. Higher regulatory costs favor economies of scale; those costs represent a higher share of small banks' profits than those of their larger competitors, giving big banks a big advantage.
Perhaps more importantly, big banks will continue to benefit from being too big to fail. No matter how tough the political talk, the U.S. Treasury will still serve as the moral-hazard back stop, even if it's a reluctant one. Sure, Citigroup
Fool contributor Stephen Mauzy, CFA, owns shares of Citigroup. He's the author of the upcoming book Wealth Portfolio. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.