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The Dodd Effect on Bank Stocks

Bank stocks are little changed in the wake of Senator Dodd's press conference, in which he announced four major goals for financial regulatory reform: 1) end too big to fail, 2) create an independent consumer watchdog, 3) develop an early warnings system to identify practices or products that may be a threat, and 4) more transparency and accountability for hedge funds and derivatives.

One little surprise: some form of the Volcker rule appears to be in the bill.

Volcker Rule: Requires regulators to implement regulations for banks, their affiliates and bank holding companies, to prohibit proprietary trading, investment in and sponsorship of hedge funds and private equity funds, and to limit relationships with hedge funds and private equity funds. Nonbank financial institutions supervised by the Federal Reserve will also have restrictions on their proprietary trading and hedge fund and private equity investments. Regulations will be developed after a study by the Financial Stability Oversight Council and based on their recommendations.

If true, that would face significant opposition from the Street and many Republicans.

Elsewhere: delinquencies dropping at credit card companies, but no loan growth. American Express and JP Morgan have joined Capital One , Bank of America and Discover Financial in noting that credit card delinquencies declined in February.

This is good news. The bad news: the stocks are not reacting to the upside, traders tell me, because loan balances are down notably. This is the other side of the coin: delinquencies are down, but there is still is no loan growth. We will need loan growth to hit earnings numbers.

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