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Financial Stocks Roundup: Banks Fight Credit Exposure Rules


The Fed heard arguments from several Wall Street CEOs about a rule limiting counterparty risk

MINYANVILLE ORIGINAL JPMorgan Chase's (JPM) Jamie Dimon said that the meeting between regulators and bank CEOs at the New York Fed today resulted in "give and take."

Along with Dimon, Morgan Stanley's (MS) James Gorman, Bank of America's (BAC) Brian Moynihan, and State Street's (STT) Joseph Hooley were seen heading to the meeting.

Dimon told Bloomberg that "everything" could have been on the agenda before entering the meeting. One topic that will likely be discussed is the particularly vague methodology of the "stress tests" that simulate extremely adverse economic conditions to test the steadfastness of banks' Tier 1 capital ratios. Passing the test is prerequisite for raising dividends.

The bankers are also objecting to a proposed rule limiting counterparty risk. If this regulation was put into place, systemically important banks will have to limit credit exposure to one another to just 10%. The Dodd-Frank law only mandates a 25% cap. The banks argue that this cap would limit credit and liquidity.

Goldman Sachs (GS) claims that the rule would reduce economic growth by 0.4% and cost the country 30,000 jobs.

Financial stocks are underperforming the S&P 500 (SPY) today. The Financial Sector Select SPDR ETF (XLF) is down 0.74% today. A private measure of job creation in April fell short of even the most bearish estimates and factory orders in the US slipped less than expected in March.

Goldman Sachs CEO Lloyd Blankfein is an outspoken advocate for gay rights. He has even starred in an ad for the Human Rights Campaign. Wall Street's firms have some of the most progressive policies for LGBT employees. However, Blankfein says, Goldman's support for gay marriage is "not without a price."

"There was some adverse reaction by someone," he said. "They didn't want to continue a relationship that they had with us in money management ... I won't say the name but if you heard the name it wouldn't surprise you."

Twitter: @vincent_trivett
No positions in stocks mentioned.
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