Wall Street banks scrambled yesterday to determine how they might have to adjust their business models to comply with newly proposed rules that could push the banks to downsize, the New York Times reported today. In testimony before the Senate Banking Committee yesterday, a Federal Reserve official, Daniel K. Tarullo, said that the central bank was hoping to tip the regulations against banks that are still thought to be too big to fail, and in favor of smaller, less-complex banks. While Tarullo gave few specifics on how the rules would be carried out, his comments suggested that financial firms that rely the most on Wall Street trading, like Goldman Sachs and Morgan Stanley, would probably face the stiffest requirements. The rules could increase the pressure on the big banks to reduce, or even sell, some traditionally profitable operations, like lending to hedge funds and other investors.
