Spectacular first-quarter results posted by the likes of Goldman Sachs and JPMorgan may have eased immediate concerns regarding the health of the global banking sector, but take a second look at the financial reports and policy-makers are faced with an uncomfortable truth: prop trading, that hub of high-octane risk-taking, has resumed centre stage.
Regulators and policy advisors have taken a very dim view of this so-called 'casino capitalism' - in which banks, it is argued, make big bets with other people's money - and with good reason. In 2008 alone, banks' trading desks on average made a 25% loss, according to data provided by Dow Jones. But even as the global authorities debate the role of the prop desk in fuelling the crisis, and procrastinate about the most effective way to restrain it in the future, the former titans of Wall Street are out on the block making fast money all over again. The casinos, it is clear, are still open. Are these desks trading on borrowed time, making one last dash for profits before their activities finally get closed down? Or do they signal a return to business as normal?
