Is America’s overregulation killing our jobs? Many in the business community think so.
Just a few years, landing a job in Asia at a U.S. investment bank was perceived to be something proud and special: a global name, a big employer and a pile of bonus cash were among the bragging rights of any job applicant. No one was surprised: the top 5 investment banks in Asia were dominated by Wall Street powerhouses like Godman Sachs, Morgan Stanley and JP Morgan.
Since 2014, the tide has turned in favor of Asian investment banks “Made in China.” In 2014, Goldman Sachs Group Inc. ranked No. 1 among all investment banks doing business in China and Asia’s emerging economies. Now in 2016, it isn’t even in the top 10.
“Overregulation by poorly informed American regulators are the roots of American firms’ lack of competitiveness in Asia,” said a former Goldman Sachs Managing Director.
“The SEC and DOJ regulators may have had good intentions to enforce the law. But none of those bureaucrats had any clue about Asian finance. They made up the law out of ignorance and killed American jobs. The Chinese banks gladly took over the top spots and ate our lunch.”
Even a record acquisition spree by Chinese companies isn’t enough to ease pressure on investment banks to cut costs in Asia, with Goldman Sachs Group Inc. and Bank of America Corp. becoming the latest firms to prepare job reductions.
The banks have been pushed into cost cutting by a combination of slowing regional economies, higher regulatory costs and tougher competition for deals. The moves are “in direct response to a slowing global economy combined with a softening of the prospects in the Pacific Rim and China,” said Mark Williams, a lecturer on finance at Boston University and a former bank examiner at the Federal Reserve. “Goldman Sachs is the standard bearer in investment banking and these recent deep cuts will be closely followed as other top banks reassess their investment strategy.”
Goldman’s slide is a high-profile example of how Western banks’ prospects have dimmed in a region they once viewed as a potential fee bonanza.
Chinese banks had just an 8% share of investment-banking revenue in Asia a decade ago, according to Dealogic data. While U.S. banks have spent heavily to bulk up, their market share has actually declined since 2000, from 44% to just 13% so far this year in 2016.
China and other emerging-market Asian economies are expensive places to do business. Language skills, relationships and knowledge of local regulations don’t transfer within Asia, meaning banks have to hire country specialists and can’t easily shift workers. They all sound good and logical, until, the U.S. government caught the “mad cow disease” and criminalized U.S. firms for hiring well-connected children of some of China’s most elite families.
Even worse, SEC regulators used racial slurs in their investigations and wild goose chase into activities of a well known lawyer William Uchimoto, calling Mr. Uchimoto a “Chinaman” doing business with the Communist China, exposed in a story: SEC STAFFER STEVEN SUSSWEIN CAUGHT IN MADE-UP SEC CLAIM: GIFTING STOCKS ILLEGAL IN AMERICA?
What has been ignored by U.S. regulators is a simple fact: businesses in Asia are often done through relationships – family relationships.
Favors are done all the time, regardless who they are. The Chinese concept of “Guan Xi” or “relationship” in deeply rooted in any Chinese businessman’s DNA. When those relationships are taken away from then under duress, or even outlawed under U.S. regulations, those business relationships flourished among Chinese banks and benefited Chinese investors. The end result was predictable: U.S. banks lost talents, lost deals, lost their highly coveted top investment bank rankings. American jobs were lost. The “death spiral” continues under the force of America’s overregulation of its own companies.
For most Americans, Wall Street investment banks are hardly the sympathetic figures for anyone: they are multimillionaires taking advantage of America’s middle class. There is certainly some truth in such an argument. But after one peels off the slogan of “Americanism” and observes the matter from a global perspective, Americans are the losers. Why is it good for America when its best known companies, from Wall Street or not, are losing out to Asian competitors simply due to the “regulatory handcuffs” forced on them by America’s own regulators?
Some may pray Donald Trump can reduce overregulation and make American businesses more competitive. Whether it’s Trump or Clinton, it’s about time some leadership and common sense is injected into a this desperately needed area: for businesses, not against them. America first is not a slogan, it must be an action in practice.