Breaking up the banks might make campaigning politicians look good, but it won't help bank investors much.
That's the big takeaway from a Keefe, Bruyette & Woods report issued over the weekend, which looks at the prospects and ramifications of bringing back Glass-Steagall, legislation that put a wall between commercial and investment banking but was done away with in the late 1990s.
Glass-Steagall unexpectedly jumped back into the political conversation when Republicans referred to their desire to bring back elements of the legislation in July as part of their campaign platform. Democrats doubled down, and said they want to restrict Wall Street banks more. Not everyone is happy about the shift, and KBW analysts say it's not a good deal for most on Wall Street, including stockholders.
"Investors should not view the reinstatement of Glass-Steagall as a potential way to unleash value in large banks," they wrote. "A Congressional approach to breaking up the banks would not be based on economic value creation, but be based on the politics of applying penalties to the largest banks."