Vengeance Is Expensive

Goldman Sachs, the investment firm progressives love to hate, is giving them another reason to hate it. They're forming a private bank that will specialize in loans to wealthy people and corporations. The private bank isn't going to be a big portion of their operations at first, but they see a need to get into the game.

Rules that stem from the U.S. Dodd-Frank overhaul, including the Volcker rule, which limits the gambles a bank can take with its own money, and international capital rules that dictate how much risk Goldman can take on, are crimping the firm's ability to make profits in its trading business, executives say. 

"It is difficult to make radical decisions when the rules of the game are being revised by regulators on both sides of the Atlantic and no one can confidently say how market and competitive conditions will change as new regulations are rolled out," said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York.

One of my friends from Cursillo works at a local bank and has the same story. Dodd-Frank and Basel II have forced his bank to move a large number of employees from profit-making portions of the bank's business into regulatory compliance and therein lies a large, unreported part of the story of our economy. The sluggishness we're experiencing is as much a result of our lost economic freedom as it is our massive debts.

In my own business, I've seen regulations grow like weeds until they are completely out of control. All manner of normal business activities are now curtailed or effectively prohibited. Purchasing IT gear, travel, conference attendance and more have been regulated into paralysis. Dodd-Frank is doing the same thing to our banking system and ObamaCare is just getting started with our healthcare system. Even if banks had plenty of money to lend and businesses had opportunities to expand, smothering government regulations suppress activity.

Ironically, it's this fact that makes me the most optimistic. Debts may take a long time to unwind, but government oppression can be lifted with the stroke of a pen.

This pen isn't going to do the job.