Trade the Congressional Effect by Eric T. Singer

Author:Eric T. Singer
Language: eng
Format: epub
Publisher: John Wiley & Sons, Ltd.
Published: 2012-08-30T16:00:00+00:00

Sadly, this does not begin to be a comprehensive list. In theory, the bill is not all bad, just mostly bad, in a fragile economy that needs animal spirits more than anything else. In the short term, this law is terrible for banks because it requires so much time and effort to fill in the blanks on the regulations and because it restricts their businesses so much. It is difficult to overstate the paralysis this kind of a bill can generate. For example, in just the asset-backed area, after a year of frenzied effort, the SEC recently released a 667-page proposed rule amending disclosure requirements for asset-backed securities. The Congressional Effect applied to the bank stocks as they underperformed the S&P 500 Index from the day Dodd-Frank was passed in July 2010 (see Figure 5.6).

Figure 5.6 KBW Bank Index vs. S&P 500 Index.

Source: Yahoo! Finance

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