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The trends outlined in this report have transformed finance. Many of them will only intensify. Private-equity firms will keep diversifying away from buy-outs into lending and life insurance. Hedge funds will continue consolidating and reaping the benefits of scale. The brain drain from banks to hedge funds and other asset managers will carry on. So will the quest of some on Wall Street to rip off Main Street. The craze in cryptocurrencies and leveraged exchange-traded funds is already making the meme-stock madness of 2021 look quaint by comparison. President Donald Trump, for his part, seems more keen to profit personally from the gamification of markets than to protect investors through regulation.
The instinct of regulators will be to disadvantage the new titans of Wall Street by cutting red tape for their competitors in the banking industry. Michelle Bowman, the Fed governor responsible for financial regulation, said recently that rules had pushed “foundational banking activities out of the banking system into less regulated corners of the financial system”. She wants to change that. Daniel Tarullo, a former bank regulator at the Fed, likens...