Good afternoon,

I'm William D. Cohan, the author of six books and a former M&A banker. Welcome back to Dry Powder, my private email about what's really happening on Wall Street. If you haven't yet had the chance, you'll need to subscribe to Puck to read my latest column in full.

In the meantime, please enjoy this free preview of Dry Powder, regarding the astounding profitability of the nation's largest banks—and how Washington (with an assist from Mark Zuckerberg)—inadvertently launched a Golden Age on Wall Street.

“As Good as It Gets”: Wall Street Eats Its Cake

A decade ago, Congress and the vox populi banded together to try to send Wall Street bankers to the clink and chasten the industry for a generation. How’d that go? Re-regulation made the industry stronger and richer than ever—just as the mob moved on to Silicon Valley.

Welcome to the new Golden Age on Wall Street. JPMorganChase, our biggest bank by nearly every measure, is pumping out $40 billion in profits a year, and its formidable chairman and C.E.O., Jamie Dimon, told me recently that he sees no end in sight to the machine’s ability to generate the majority of those profits. In its recently announced third-quarter, the bank made a profit of $11.7 billion, which includes a $2.1 billion reversal of Covid-related loss reserves that the bank believes are no longer applicable. The bank also has another $20 billion of accrued reserves on its balance sheet that could be reversed and brought back into earnings if the economy continues humming.

These are astounding numbers, to be sure. On an annualized basis, it’s not inconceivable that Dimon’s bank could be earning more than $45 billion a year. Let’s put that into perspective: Apple, on any given day the world’s largest company with a market capitalization of $2.5 trillion, had net income of $86 billion in the 12 months ended June 2021. “Credit continues to be quite healthy, in fact, net charge-offs are the lowest we’ve experienced in recent history,” Jeremy Barnum, the bank’s new chief financial officer said last week. No wonder the JPMorganChase board of directors is doing everything it can to keep the 65-year-old Dimon around for at least another five years.

The rest of Wall Street is performing well, too. Goldman Sachs earned $5.4 billion in third-quarter profit, and has made nearly $18 billion in profit in the first nine-months of the year. The firm’s year-to-date, pre-tax earnings margin—how much of its revenue becomes profit—is an astounding 47 percent. That means that nearly half of every dollar of revenue that Goldman Sachs has received so far in 2021 became profit! Wells Fargo’s Mike Mayo, the dean of Wall Street research analysts, is even more impressed by the higher profits Goldman is making on the marginal dollar of revenue—but that’s a tad wonky...

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