Here's an email my friend Jerry Bowyer sent over this morning. As usual, Jerry offers some very good insight...
From: Jerry Bowyer
Subject: FW: DealBook: Morgan Stanley's Profits Rise, Defying Subprime Slump
...so first there's Lehman bros income up, Goldman did okay and now we see that Morgan's doing well. All of these guys were fingered as threatened by the 'sub-prime-contagion-apocalyptic melt-down. Well it looks like not so much. Sure, they got hit a little in the fixed income divisions but what the press missed is the tremendous benefit of deregulation.
In 1995 Clinton and the Rs in Congress, dismantled FDRs banking regulation regime, allowing commercial and retail banking in the same entities. A wave of mergers (along with a wave of media handwringing about them) followed. Now they're diversified. The guys doing mortgages are under the same roof as the guys doing big corporate deals, so if mortgages get a little dicey, that's okay, because mergers and acquisitions business is making up for it.
Deregulation is the driver of banking resiliency and is, I think, the missed angle of this story.
Have a nice day,