Saying the two have grown apart in recent years, the financial industry announced this week that it was breaking up with the financial regulatory system after decades of cohabitation.

Saying the two have grown apart in recent years, the financial industry announced this week that it was breaking up with the financial regulatory system after decades of cohabitation.


“After a great deal of thought and discussion, we have decided to separate from the regulatory sector,” the leaders of Goldman Sachs, JPMorgan Chase & Company, Morgan Stanley, Bank of America, and Citigroup wrote in a joint statement. “We wish the regulators and legislators all the best as they move forward — without us and with new, landmark legislation that will vastly expand the authority of the federal government over Wall Street. We’re just sorry we can’t be a part of it. But after many rewarding and fulfilling years as companions and partners, we feel it is better that each of us go our separate ways in pursuit of continued happiness and satisfaction.”


There had been some grumblings by the financial industry lately about hefty fees to be levied that would essentially force big banks and hedge funds to pay the projected $20 billion, five-year cost of the new oversight that they will face. But still, when the financial industry circulated a joint e-mail message to their lawyers and lobbyists last week announcing that they had decided to separate from the regulatory system and its laws after years of companionship, the news landed with some shock.


“We obviously have learned that the public’s business is not always for the private sector and the private sector is not always for the public’s business,” said one lobbyist, who teaches lobbying history at the exclusive K Street School in Washington, D.C., and has written extensively about the challenging relationship between financiers and regulators. “But you want to believe that there are certain marriages that will last. The finance marriage seemed to have become a national fixture and it was almost unthinkable that it would ever end.”


The finance industry and finance regulators were longtime companions whose public struggles — the industry’s with Depression Era regulations and the regulators’ with derivatives trading  — did nothing to suggest anything besides a stable and mutually supportive and dependent team.


While the recent financial crisis had clearly put a strain on the longtime and often loving relationship between the finance industry and its regulators, there were no rumors that either party had lost interest in the hopes and wishes of the other. This decision, the financiers said, simply had to do with a couple that had grown apart after decades of living together.


“I know people are feeling surprised, but there’s just not a lot of drama behind this,” said a Wall Street lawyer, who is acquainted with many of the country’s top financiers. “They remain very close friends.”


In their e-mail message to their lawyers and lobbyists, the leaders of the big U.S. banks cited a “mutual and mutually supportive decision that we have made together following a process of long and careful consideration.”


The finance industry, which has traveled extensively beyond the rules and laws of traditional trading in recent years in support of its money-making ventures and shadow banking activism, had settled into a full post-Glass-Steagall life while the regulators seemed increasingly less involved in what the financiers were doing and less a part of the industry’s daily life.


“I was shocked, and I was around them both an awful lot,” said a former lawmaker who is now a principle lobbyist for investment banks. “After the finance industry had fought off some of the toughest restrictions on their ability to invest their own funds that had been proposed in the regulatory bill, and after they had thwarted an attempt to make them give up their highly profitable derivatives trading desks, I thought everything was going to be fine between the two. There are always disagreements, but there is always room to agree, and I thought that was where we were headed. It would all be worked out, as it usually is, with big lobbying fights in the future, when complex and vague laws would be turned into something that would be agreeable to businesses, and regulators and financiers would live together happily ever after.”


Lawmakers said they were stunned when they learned that the finance industry had decided to separate from the nation’s regulatory system, but they vowed to soldier on with their effort at creating a robust set of rules for finance companies even if those companies were no longer going to live by those regulations.


Said one upbeat lawmaker, “Maybe without them around we can finally get the Volcker Rule passed.”


Philip Maddocks can be reached at pmaddock@cnc.com.