The good folk at Morgan Stanley are a little chastened: Having trumpeted how clean it was earlier this year when Eliot Spitzer, New York state's energetic attorney-general, forced Wall Street to cough up $1.4 billion for issuing biased research, the starchiest investment bank of the lot must now pay $50m for mis-selling mutual funds. Even banks with the least tarnished reputations seem riddled with conflicts of interest, perverse incentives and greed. Small wonder that they have bleated as regulators have shone a spotlight into their murkiest corners. Funnily enough, the extra attention does not seem to have hurt them much. Indeed, profits have held up remarkably well. The Securities Industry Association (SIA), a trade group, estimates that Wall Street firms will earn $22.5 billion this year, over three times what they made last year and more even than the $21 billion they made in 2000. This year, reckons Mercer Oliver Wyman, a consultancy, their return on equity will be around 20%, almost double last year's figure, and only slightly less than the peak of 24% in 2000 (see chart). In not one year since the bubble popped have the top, bulge-bracket firms as a group lost money. Investors who have spent the past few years fulminating at tumbling stockmarkets and Wall Street greed will doubtless be delighted.
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