TNR's Noam Scheiber makes a good point about how the Senate's just-passed financial reform bill works:
And yet, perhaps unwittingly, the upshot of financial reform will have been to make it costlier to be a big bank relative to being a small or medium-sized bank—which is to say, it has effectively taxed bigness. That's because the legislation imposes a handful of new mandates and regulations—like oversight by a soon-to-be-established consumer financial protection agency, as well as limits on fees for debit-card transactions—from which small and medium-sized banks are exempt. Other reforms—such as a bill Congress passed last year to limit hidden credit-card fees and make statements more transparent, and new restrictions on trading derivatives—would disproportionately dent profits at megabanks. These banks tend to have far bigger credit card operations, and are the only bona fide derivatives brokers around.
I'd only object to the "unwitting" part -- this has long been the strategy of those Democrats who were unwilling to break up the banks. Noam also forgets that the bill contains provisions to raise leverage and capital standards at the largest financial institutions, language that has been reinforced by Susan Collins' amendment. That in itself will help restrict profit and increase cost. And, while the Merley-Levin amendment to strengthen the Volcker rule didn't get a vote, there are still authorities in the bill for regulators to limit certain risky bank activities, making it more expensive to be big.
-- Tim Fernholz
