Wall Street profits set to double in 2012

Operations on the New York Stock Exchange are on pace to generate more than $15 billion in gains.

By The Fiscal Times Oct 10, 2012 1:32PM
By Yuval RosenbergThe Fiscal Times logo

Wall Street is on pace to generate more than $15 billion in profits this year, double last year's total and in line with pre-recession levels, according to an analysis released Tuesday by the New York State comptroller. 

At the same time, the securities industry, which had record earnings in 2009, remains in the midst of a painful evolution five years after the start of the financial crisis and still faces headwinds as a result of a tepid economic recovery and lingering regulatory uncertainty, the report finds.

"The securities industry remains in transition, and volatility in profits and employment show that we have not yet reached the new normal," New York State Comptroller Thomas DiNapoli said in a statement accompanying the report.

Wall Street banks suffered record losses as the subprime mortgage crisis threatened to topple the entire financial system in 2007 and 2008. The banks then rebounded to record profits of more than $61 billion in 2009 and another strong year in 2010. But the fallout from the crisis has prompted them to change their business mix and shift away from the once profitable, if risky, practice of trading their own money. The more traditional investment banking business of advising on mergers and acquisitions has also been under pressure as dealmaking activity has slumped in a soft economy.

Wall Street Revenues and Expenses In the face of those challenges, the broker/dealer operations of the New York Stock Exchange member firms generated $10.5 billion in profits in the first half of this year – the fifth-best start on record – even as revenues for the industry continued to dwindle and revenue for the five biggest banks dropped to their worst levels since 2008.

But last year also started strong, with the securities industry earning $12.6 billion before the European sovereign debt crisis and the protracted negotiations in Washington over raising the U.S. debt ceiling undercut the global economy and resulted in a much worse second half. The industry posted $4.9 billion in losses for the last six months of 2011, ending the year with what the DiNapoli report terms a disappointing $7.7 billion in profits.

Similar headwinds could still derail 2012 profitability as well. "The impending fiscal cliff and further deterioration in domestic and global economic conditions could quickly erode profitability in the securities industry in the second half of this year," the New York State comptroller's office said in releasing its report.

Pretax Profits at Securities Firms Regulatory uncertainty continues to take a toll, too, as banks prepare for new rules as well as higher capital and margin requirements. The exact parameters of the widespread reforms ushered in by the Dodd-Frank Act of 2010 remain unclear. As of Oct. 1, only a third of the nearly 400 rules required by the law have been completed, according to a progress report produced by the law firm Davis Polk and cited in the DiNapoli analysis. Another 135 rules have been proposed but not finalized, and 136 rules have yet to be proposed.

Image, Bull copyright Photographers Choice RF, SuperStockAmong those rules yet to be finalized is the so-called Volcker Rule, which seeks to limit proprietary trading by large financial institutions. A first draft of the rule was released last fall, but the final language has been the subject of a highly partisan lobbying battle, including attacks on its workability and questions about possible exemptions and the rule’s overall effects. A final version is expected by the end of the year, but banks have already cut back sharply on proprietary trading in anticipation of the new regulatory landscape. Revenue from trading on their own accounts fell by 15 percent in the first half of 2012 compared to the same period in 2011, the DiNapoli report says.

The banks are also still dealing with the legal fallout from the financial crisis. New York Attorney General Eric Schneiderman last week filed a civil fraud suit against JPMorgan Chase related to subprime mortgage-backed securities sold by Bear Stearns, which JPMorgan bought at the start of the crisis in 2008. And Bank of America last month agreed to pay $2.43 billion to settle a shareholder lawsuit related to its 2008 purchase of Merrill Lynch.

Yuval Rosenberg is the Business+Economy editor at The Fiscal Times. Subscribe to The Fiscal Times' free newsletter.

More from The Fiscal Times

Oct 10, 2012 2:44PM

Wall Street bonuses are set to be higher because the work force has "shrunk." Maybe Wall Street will be even happier if the work force shrinks to zero.

Oct 10, 2012 3:34PM
The rich get richer and the poor get poorer,just the way the Rethuglican party likes it.
Oct 10, 2012 5:09PM
This is what everything is about. Wall Street's greed and everyone else in need. The wealth gap continues to grow and they wonder why people are upset with flaunting this in front of 99% of Americans that work harder and are getting less for it each and every year..
Oct 10, 2012 5:13PM

No matter what the Lyin Mexican Mormon Moron tells you today he is not going to live up to his promises. His campaign manager told everyone that he is an Etch a Sketch player.


Ban abortion, Ban contraceptives. Have biblical fairy tale Creationism taught in all schools as a true science, force women to have vaginal ultrasounds.

The true goals of the radical cracked teanuts.

Can you imagine what might have happened if the Pope's boy Rick the Dick Sanitarium or lyin Ryan became V.P. under lyin Willardo, the tax evader, of the right wing radical cracked teanuts, the gay, rapist, pedophile catholic priests and the braindead evangelical nuts that listen to them. Men will no longer have to purchase condoms, as they will no longer be allowed in this country. All mens sperm must be used to create babies. Cameras will be in every bedroom. Catholic priests don't have to worry however, because, according to the testimony of former raped little boys, they don't use them.

The Pope's first order to his boy would be to release all catholic rapist pediophile priests from prison as the Pope is running out of people to continue the process of shearing his sheep. He is running out of collection pot fillers. After all, he needs the money to fight off all of the lawsuits against the church worldwide.

His second order to RickyDickyDo would be to move the White House to Vatican City.

Oct 10, 2012 5:06PM
This can't be right. Obama is bankrupting this country. At least that's what about 90% of the political posts say.
Oct 10, 2012 4:47PM
Look at the graph.  The profits of the forms were highest when the economy was worst.  This doesn't mean much in terms of economic strength of the country.
Oct 10, 2012 5:26PM

This is due more to the shortcomings in the rest of the economy than anything else.  Foreign markets are unstable, particularly Europe and Asia.  Real estate has not yet recovered.  And with QE3 the bond market will stay at rock bottom until at least 2015.  The best and most stable place to put your money is the stock market.  So, buying stock is up, securities and bonds are down.  Nothing really suprising here.  If you have any money invested, you are smart and moved it into the stock market for the next 2-3 years.  If you didn't, this doesn't help you a bit. 

This isn't the result of anything other than QE3 keeping the interest rates so low that you can't make a decent return anywhere else, so everyone is currently flooding the stock market.  The hope of QE3 is that businesses will take the added money and create jobs.  This didn't happen the last two times the fed introduced quantitative easing, and it probably won't help this time either, but at least it gives us a clear place to move our investments. 

Oct 10, 2012 5:32PM
This is due to insame usama dummping billions of taxpayer dollars into the market to shore up wall street and bankers. Just so he can buy more votes... Check the volumes very low. You will see a lot of the people in the market removing the government money and the market will fall and the big banks that usama said he would regulate making more undeserved billions.  A special gift from the usama again at the taxpayers expense.
Oct 10, 2012 5:10PM

Repuke braindead and brainwashed dopes that are voting for the lyin Mexican Mormon Moron tax evading draft dodger because they think he is against abortion. When are you dopes going to wake up. This morning lyin Willardo told the Iowa Register newspaper that he has NO plans to change any abortion laws.

He lies to whatever group he speaks to. So no one really knows what the liars policies are.

It was too bad that Harold Camping did not succeed in taking away the base of the repuke dunce party.

Harold Camping, the evangelical king, got 500,000 of these pathetic radical right wing braindead evangelical Children of the Corn zombies to give up all of their worldly possessions to go meet and stay with the man in the sky. They are so easily brainwashed. Camping, considered the evangelical king by many because of his 50 year history of bible study, promised to take away these right wing bible nuts on the last Rapture Day on Oct 21, 2011. All of his calculations were based on "biblical facts" When it did not work, he then realized that the bible in most part is "pulp fiction".

Yet these braindead fools continue to believe that there are men and boys with wings on flying around blowing horns.

The only thing to do to cure these zombies is to send them all back to the Garden of Eden on Noah's Ark to start over again, unless of course, they fall off the end of the flat earth.

These braindead idiots would still be believing in Santa Claus and the Tooth Fairy, if their parents did not tell them otherwise. It is unfortunate that they don't believe their leaders, when they tell them how worthless repuke lyin Willardo, the Mexican Mormon Moron tax evader, bankrupter, draft dodger, job outsourcer and Etch A Sketch Champion is.

Many of them still believe that the earth is flat and that dinosaurs never existed. It is all a liberal conspiracy.

Oct 10, 2012 5:08PM

You will never hear this on Fox Lies.

The Dow and S&P are close to 5 year highs and the NASDAQ is at a 12 year high. Corporations have more cash on hand than ever before in history, unemployment has gone down for 30 straight months, consumer sentiment is rising and consumer spending is rising. Peoples' IRA's are doing great. Why would anyone want to vote for a lyin repuke tax evading, draft dodging criminal to destroy our economy again like was done under Bush Bin Lyin and his criminal gang-led by President Cheney.

Oct 10, 2012 5:09PM

Even lyin Willardo's Mexican daddy knew what he would be like when he grew up So he gave him his first name "Willardo" after the large movie rat. He gave him his middle name after an old baseball glove that they found in the family outhouse that was full of shxt. They shortened lyin Willardo's first name to Willard and their last name from Robberos to Romney when they smuggled little lyin Willardo over here from his birthplace in Tijuana.

He is now known by most people as Mitt Robme.

It is amazing how these right wing nuts believe that lyin Willardo, in any way is going to do anything but destroy our country again. He is going to eliminate regulations so that his corporate criminal masters can rob and steal from us once again as they did under Bush Bin Lyin and his criminal gang led by President Cheney.

Oct 10, 2012 4:00PM
Where are all the liberals at blaming Obama for the "Wall Street Fat Cats" making profit????
Guess what socialist libs? If people aren't able to make money, you would not have a job. Long live Capitalism and long live my IRAs and 401K....

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