Let Us Now Praise Dodd-Frank

The regulations enacted under the Dodd-Frank banking bill are starting to seriously impact the way Wall Street banks do business. Salaries of bankers are in decline, as you can see from the chart. According to former Treasury Secretary Timothy Geithner,

We have substantially reduced the amount of risk they can take. We’ve cut the profitability of banking roughly in half.

Of course what Geithner means is "short term profitability," since in the long run reducing the likelihood of periodic crises will help bottom lines.

I think this is fabulous news, although one has to wonder if maybe the risk-taking part of Wall Street is just moving elsewhere, into hedge funds for example, and whether this might in the long run be just as risky. But so far I am not hearing any rumblings of that sort, and so for now the news all looks good.