Risk-taking is back for banks 1 year after crisis

NEW YORK (AP) -- A year after the financial system nearly collapsed, the nation's biggest banks are bigger and regaining their appetite for risk.

Goldman Sachs, JPMorgan Chase and others -- which have received tens of billions of dollars in federal aid -- are once more betting big on bonds, commodities and exotic financial products, trading that nearly stopped during the financial crisis.

That Wall Street is making money again in essentially the same ways that thrust the banking system into chaos last fall is reason for concern on several levels, financial analysts and government officials say.

-- There have been no significant changes to the federal rules governing their behavior. Proposals that have been made to better monitor the financial system and to police the products banks sell to consumers have been held up by lobbyists, lawmakers and turf-protecting regulators.

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Data from the April-June quarter show that the banks are leaning heavily again on their trading desks for revenue.

-- During the fourth quarter of 2008, when the financial crisis made even the shrewdest bankers risk-averse, Goldman's trading of risky assets nearly stopped. But in the second quarter of 2009, trading revenue had climbed to nearly 50 percent of total revenue, closer to where it was two years ago before the recession began. JP Morgan's reliance on trading revenue has exhibited a similar pattern.

-- Also in the second quarter, the five biggest banks' average potential losses from a single day of trading topped $1 billion, up 76 percent from two years ago, according to regulatory filings.

The government hasn't just watched banks resume their freewheeling ways and prosper. It has been an enabler in the process. The Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corp. -- during both the Bush and Obama administrations -- have made trillions of dollars available to the biggest banks through bailouts, low-cost loans and loss guarantees designed to stabilize the financial system.

Much more at the link: http://finance.yahoo.com/news/Risktaking-is-back-for-banks-apf-3400806176.html?x=0&sec=topStories&pos=main&asset=&ccode=