Financial Overhaul Could Change Wall Street

After the White House and Congress work out the details of a sweeping financial regulatory overhaul bill, the people on Wall Street will have to live with the consequences. Some look forward to the changes, but others are unhappy.

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Americans markets also showed a mixed reaction after the president unveiled his plans for changes to regulations. Bank stocks went down. That may have been in response to a big credit rating agency, Standard & Poor's, cutting its rating on 18 U.S. banks. S&P cited increased regulation as one reason for the downgrade. All this regulation, however, is still just a plan, and as it goes before Congress, NPR's Jim Zarroli spoke with traders on Wall Street.

JIM ZARROLI: On the stock exchange floor, the talk was all about a disappointing earnings report from FedEx and a big downgrade of bank stocks. For people who make their living on Wall Street, this has been one of the most terrible and exhilarating years they've ever seen. And by now most seem resigned to the fact that the Democratic administration is going to make some changes and that it's going to be a lot tougher on Wall Street than its predecessor was. That's not to say they like what the administration is doing.

Mr. BERNIE MCSHERRY (Cuttone & Company):I think that the reaction is mixed. Unfortunately, people have short memories and don't realize how bad things were last fall and close we were to systematic failure.

ZARROLI: Bernie McSherry of the trading firm Cuttone & Company watched the president's speech on TV a little before 1:00 and he pretty much liked what he saw. He appreciates the fact that the president wants to regulate derivatives and hedge funds more strictly.

Mr. MCSHERRY: Most folks, most reasonable folks, will have to acknowledge that regulation is needed. We went through a period where there was a relatively relaxed regulatory attitude and that got us into quite a bit of trouble back in the fall. And I think this is a good step in the right direction.

ZARROLI: But McSherry says that many of his fellow traders don't agree. And he says a lot of people on Wall Street are opposed to too much government regulation of the markets.

Mr. JASON WEISBERG (Seaport Securities): I'm a fan of free market capitalism and to me that's not what free market capitalism is about.

ZARROLI: There are people like Jason Weisberg of Seaport Securities.

Mr. WEISBERG: Our business is one of the most over-regulated businesses already. It is impossible to conduct business in a regular fashion without having to worry about dotting I's and crossing T's repeatedly throughout the day on the same issue.

ZARROLI: Under the administration's plan, the Federal Reserve would be given a much stronger role in regulating very large financial institutions, those whose collapse would threaten the economy as a whole. Weisberg says that's ironic because the Fed is partly to blame for what's happened in the markets.

Mr. WEISBERG: You know, there are a lot of things that went, that took place within the regulatory function of the government where they dropped a lot of balls.

ZARROLI: They being the Fed as well.

Mr. WEISBERG: Everyone involved.

ZARROLI: A lot of people here share those views, but whatever the merits of the administration's proposals, they seemed to cause barely a ripple in the market yesterday. Prices were down, but only by a bit. That may be because Congress is almost certain to change the proposals once it gets its hands on them. But it may be also that a lot of people have come to see change as inevitable and they're ready to take their medicine and move on.

Jim Zarroli, NPR News, New York.

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