Banksters in Control: Dodd-Frank Helps JPMorgan Chase

John Carney writes (my highlight):

When President Barack Obama signed the Dodd-Frank financial reform bill into law three years ago, he promised it would encourage healthy change and competition.

"This reform will help foster innovation, not hamper it. It is designed to make sure that everybody follows the same set of rules, so that firms compete on price and quality, not on tricks and not on traps," Obama said.

How is that working out? It turns out that in the view of the head of one of the biggest banks in the United States, Dodd-Frank is helping the big banks by making the cost of regulatory compliance so high that smaller rivals cannot compete.

This is from a report from a Citi analyst who spoke with JPMorgan Chase chief executive Jamie Dimon (via Business Insider):

He even pointed out that while margins may come down, market share may increase due to a "bigger moat" -- We were surprised that regulatory risk was not mentioned as one of the key risks. In Dimon's eyes, higher capital rules, Volcker, and OTC derivative reforms longer-term make it more expensive and tend to make it tougher for smaller players to enter the market, effectively widening JPM's "moat." While there will be some drags on profitability – as prices and margins narrow, efficient scale players like JPM should eventually be able to gain market share. 

  In other words, Dodd-Frank is good for JPMorgan and bad for smaller competitors. 

As I have pointed out many times, the crony capitalists use regulations to prevent upstarts from gaining a foothold. It is one of the reasons that the economy has a sluggish feel to it.

 Veronique De Rugy comments:

Real job growth comes not from people dreaming of being small but from entrepreneurs committed to building large and sustainable companies. This shouldn’t be news. A seminal 1987 study by David L. Birch, a former MIT researcher, explained that small-firm job creation occurs within a relatively few firms, the ones he calls “gazelles.” Gazelles are high-growth entrepreneurial companies that start small and quickly grow larger.

It is precisely these kinds of firms that are most damaged by regulation. They just don't operate with the economies of scale that would allow them to afford the legal staff to deal with regulations,  the way entrenched players do. Thus, the stunting of their growth and recent MBAs considering the second best alternative, management jobs at Chipolte. The only exceptions are firms in emerging sectors where there are no entrenched firms encouraging regulation.