America's financial reforms will do little to change the industry, according to respondents to our web poll last week. With bills in both the House and Senate, America's lawmakers are devoting considerable time and effort to fixing the financial industry, but an overwhelming number of our readers believe their efforts will be in vain. The reforms are largely aimed at investment banks and would introduce stricter disclosure standards for derivatives positions and bigger capital cushions, as well as give the government authority to take over failing banks and break them up. Some banking industry bodies are opposing the reforms, but investors aren't paying much attention to the threat. The sector has dipped on days with bad news, such as the various charges against Goldman Sachs and the Treasury's decision to sell 1.5 billion shares in Citigroup, but has generally remained resilient. With banks already reporting a return to profits, the prospect of an economic recovery is giving investors confidence that the sector is set for continued growth, despite the threat from financial reforms. However, it is still unclear how the backlash to the Goldman charges will affect the reforms that lawmakers impose on the industry. The market is currently betting on a light touch, but that is far from a sure thing. Even so, our readers have few such doubts. In total, 88% of the 182 voters said the financial reforms will not lead to a radical overhaul of the industry. Just 9% said they will, while 3% were undecided.
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