More Bank Regulation Means Fewer Jobs

The banking regulation and reform being pushed in Washington will likely cost even more jobs and income in the already struggling industry.

Goldman Sachs Group Inc., Barclays Plc and Deutsche Bank AG’s investment banking profit may drop by a third as governments step up regulation of the industry, analysts at JPMorgan Chase & Co. said.

Deutsche Bank’s return on equity will probably tumble the most among the world’s largest investment banks, falling to 6.7 percent in 2011 from 10 percent today, JPMorgan analysts led by London-based Kian Abouhossein wrote in a note to clients. New York-based Goldman Sachs’s return on equity will decline by 4.4 percentage points and Barclays’ by 4.3 points, the analysts said.

Governments around the world are stepping up oversight of banks in the wake of the worst financial crisis in seven decades. Forcing banks to hold more capital, and moving more derivatives trading onto exchanges are among the eight regulatory proposals the JPMorgan analysts examined.

“All banks are expected to lose earnings, but relative winners will be banks taking a proactive stance to regulatory proposals,” the analysts said in the report. Investment banks will “mainly have to shift employee compensation to shareholders to generate in our view a 15 percent over-the-cycle acceptable return on equity,” JPMorgan said.

Banks are likely to cut costs in their investment banking units by eliminating jobs, the analysts wrote. Pay is likely to fall in proportion to the decline in revenue, they added.

What they mean by "shift employee compensation to shareholders" is to cut jobs and slash the payroll. Now, who do you think is going to be making those decisions, the much demonized upper management or the lowly teller? Of course, upper management will make those decisions and it will be the lower level employees who will get it in the neck.

So here we go with even more anti-growth, anti-business attitude coming from Washington.

Get used to double digit unemployment, folks.