Chatter is picking up on Wall Street that a stiffer fin reg bill is likely to come out of Congress this week.
It could explain why financial bellwethers such as JPMorgan and Goldman Sachsperformed poorly Monday.
With banks deeply unpopular among voters and an election nearing, a growing number of analysts believe the new regulations may, in fact, have sharp teeth.
FBR analyst Edward Mills is among them.
He tells Fast Money that Wall Street is starting to accept that stricter regulations are more or less a foregone conclusion. Instead the Street's best case scenario is that once it does “regulators are not going to be overly onerous in its implementation," says Mills.
Speculation of more rigid reform first surfaced last week after primary elections results showed voters favored candidates who were tough on Wall Street; most notably the victory of Senator Blanche Lincoln in Arkansas.
Lincoln is the author of a controversial proposal that would force banks to spin off their lucrative trading desks for over-the-counter derivatives, such as credit default swaps. She wants to ensure that trading of this sort -- widely criticized for aggravating the crisis -- does not drag down banks.
The sweeping bill would also set up a new protocol for dismantling troubled financial firms and avoiding bailouts like rescue of insurer AIG in 2008, while creating a new financial consumer watchdog and mandating higher bank capital standards.
Even key Republicans who have tried to soften the bill for months appear to be resigned its passage. According to Republican Senator Richard Shelby it will "likely become law."
"Nobody believes the regulation will be a light touch regulation," says Mills on Fast Money. "It’s here and it’s going to be tough."
Approval is expected by early July.
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Trader disclosure: On June 14, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL); Edwards owns (PM); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman’s firm own (AAPL); Finerman owns (AAPL); Finerman’s firm owns (BBY); Finerman owns (BBY); Finerman’s firm owns (BP) calls; Finerman owns (GLW); Finerman’s firm owns (HPQ); Finerman owns (HPQ); Fienrman owns (RIG) calls; Finerman’s firm is short (IJR); Finerman’s firm is short (MOY); Finerman’s firm is short (SPY); Finerman’s firm is short (IWM); Terranova owns (IPSU), (BX), (PFE), (GMCR), (RSX), (TER), (AXP), (BMO), (BBY), (DIS), (XCO), (SWN), (GLD), (AAPL), (IPI), (SU), (V), (TEVA); Terranova owns UK Pounds; Terranova owns Euros; Terranova is short the US Dollar
For Tim Seymour
Seygem owns (MTL)
For Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (AMKR)
Virtus Investment Partners owns more than 1% of (IGE)
Virtus Investment Partners owns more than 1% of (DBV)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLV)
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Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (DRYS)
Patty Edwards
Edwards owns (HES) for clients
Edwards owns (XOM) for clients
Edwards owns (RIG) for clients
Edwards owns (NE) for clients
Edwards owns (SLB) for clients
Edwards owns (HAL) for clients
Edwards owns (WFT) for clients
Edwards owns (DO) for clients
Edwards owns (GLW) for clients
Edwards owns (BBY) for clients
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Edwards owns (V) for clients
Edwards owns (AKAM) for clients
Edwards owns (AAPL) for clients
Edwards owns (DELL) for clients
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Edwards owns (INTC) for clients
Edwards owns (TXN) for clients
Edwards owns (NVDA) for clients
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Edwards owns (CSCO) for clients
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Edwards owns (QQQQ) for clients
Edwards owns (PM) for clients
Dennis Gartman
Funds Managed By Dennis Gartman Are Short Yen
Funds Managed By Dennis Gartman Are Long Canadian Dollar, Australian Dollar
Mike Khouw
Cantor Fitzgerald makes a market in (HOT)
Jon Najarian
Jon Najarian owns (NYX) and seats on the exchange
Jon Najarian owns (CME) and seats on the exchange
Jon Najarian owns (CBOE) and seats on the exchange
Ed Mills
***No Disclosures***
Darren Horowitz
Raymond James & Associates received non-securities-related compensation from (EPD) within the past 12 months.
Raymond James & Associates received non-securities-related compensation from (PAA) within the past 12 months.
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