By Lauren Tara LaCapra
Ask a Wall Street CEO whether his bank will be able to make as much money as it used to make, once customers start trading and doing deals again. He will inevitably respond with some form of “Yes!”
Ask just about anyone else with a shred of common sense and the answer is more along the lines of “hahaha…you’re kidding, right?”
This conversation is known on Wall Street as the “Structural vs. Cyclical” debate. On the structural side, you’ve got those who are convinced that new regulations, higher capital requirements and clients’ mistrust of big, conflicted i-banks will keep a lid on profits for firms like Goldman Sachs, JPMorgan and Morgan Stanley. On the cyclical side, you’ve got people like Goldman CEO Lloyd Blankfein and JPMorgan CEO Jamie Dimon, who keep insisting that everything will be just fine once various “headwinds” subside.
But the longer this so-called “cycle” of weak Wall Street profits trudges on, the broader the Structural Change Coalition gets.
On Monday, S&P came out with this blaring headline: “The Weakness In Capital Markets Revenues Is More Of A Structural Than Cyclical Phenomenon.”