A Bloomberg news article reports on one consequence of the Dodd-Frank law increasing regulation of banks:
Schonfeld Group Holdings already has 34 teams managing $7.5 billion of positions and is seeking to get bigger. His family office offers a home for top Wall Street portfolio managers as banks are constrained by new rules limiting trading for their own books. One of the biggest teams, Quantbot Technologies, which has been working for him for six years, is run by a nuclear physicist who helped establish electronic-trading platforms at Morgan Stanley and Merrill Lynch & Co.
"We can be flexible, entrepreneurial and nimble," said Schonfeld. The Dodd-Frank Act and the Volcker Rule have meant "the banks lost a lot of talent, and we were able to have an offering that was unbelievably competitive."
So instead of working for shareholders of Morgan Stanley or Merrill/Bank of America — shareholders who include lots of public pension funds and individual small investors — the talent now works for an individual billionaire. I guess one can make the case that that serves the public interest by insulating the smaller folks (and the system overall, supposedly) from risk. But the flip side is that the same rule deprives those same smaller investors from sharing the rewards. The Bloomberg article is nice because it offers a very specific and concrete example of this. (And the banks are now trying to make up the profits they lost on trading by instead closing branches, laying off employees, and increasing fees to customers.)
