The pop culture phrase “that awkward moment” could easily have been coined to describe the political predicament of Wall Street. After spending two years and something like $2 billion trying to dislodge Democrats and install a one-party Republican government in Washington, it woke up Wednesday morning to find that voters had been moving in the opposite direction. For the next two years it must deal with the newly empowered Democrats that it failed to dislodge, along with other changes in the political winds, such as the likelihood of a less activist Supreme Court for the foreseeable future.
With fewer friends in Washington, Wall Street can scarcely expect the same level of favors it has received from Washington over the last 12 years. And although the changes in policy are not likely to be anything drastic, they still could represent a difficult adjustment for a sector that has come to believe that the government has an obligation to take care of it.
While the United States was busy holding an election, ING was announcing layoffs. It will be cutting 1,000 jobs from its European banking operations, part of a total of 2,350 job cuts planned.
One important consequence of Tuesday’s U.S. election was the formation of essentially a one-party government in California. At the same time, voters there approved a tax increase on the highest levels of personal income. In combination, these changes may make it possible for California to rescue its broken public finance system, and that in turn may take away nearly half of the municipal bankruptcies that otherwise would have occurred in the United States over the next few years.
An Australian court has found S&P liable for some of its sloppy work in rating securities that were sold to Australian municipalities. It is the first such decision holding a ratings agency responsible for actions intended to mislead securities buyers on behalf of sellers.
U.S. banking regulators issued a statement today signaling a go-slow approach to new capital requirements. New rules will not go into effect on January 1, as some had anticipated, and will be phased in over an extended period of time.
About 5 percent of the region affected by hybrid storm Sandy is still without electricity 10 days later, and it is becoming clear that in New York, the transportation network will not be back to normal before the end of the year. This especially affects banks and exchanges in lower Manhattan, in an area that now is effectively accessible only by bus.