US President Barack Obama has taken a sledgehammer to the model that Wall Street investment banks have created over the last three decades.
And yet, as is always the case in business, one man's misfortune is another man's opportunity.
If Europe plays this right, it could establish its banks and financial centres as the industry's leaders. The dominance of Wall Street may be coming to an end.
In effect, "Wall Strasse" can overtake Wall Street: European financial centres can lure refugees from the tightly regulated New York markets, and the big European banks can start offering customers the all-in-one service that their US rivals won't be able to any more.
The impact of Obama's assault on the investment banks is clear. The US plans to prevent banks from proprietary trading — that is, taking positions in stocks, bonds, currencies or other instruments on their own account. And it intends to stop them from owning hedge and private-equity funds.
It remains to be seen whether the legislation can be passed, and whether the banks can find a clever way of sidestepping the rules.
But Europe's response should be very simple: The region should do precisely nothing. There will be plenty of pressure to match the US proposals with their own restrictions.
George Osborne, the Treasury spokesman for the UK's opposition Conservative Party, has already hinted as much. Regulators in Frankfurt, Paris and Brussels will be told they should copy the new rules.
They should resist. Obama's proposals are senseless. They are driven by populist fury at the greed and irresponsibility of the banking industry rather than a cold-headed analysis of the problems.
That is understandable. The way the banks have gone straight back to paying huge bonuses so soon after many of them collapsed has displayed breathtaking arrogance, and a lack of political savvy for which they will pay a high price. In effect, they may well have blown up their whole industry for the sake of a single year's bonus.
Once Obama's bill is pushed through, the US banks won't be allowed to offer the full range of services anymore.
That doesn't mean the demand won't be there. The customers will shrug and switch to the banks that give them what they want: the likes of Deutsche Bank AG, Barclays Plc, BNP Paribas SA, and Credit Suisse Group AG.
For three decades, the growth of the European banking industry was constricted by their inability to become major players on Wall Street. New York was the centre. If you weren't dominant there, you couldn't compete at the highest level.
In effect, "Wall Strasse" can overtake Wall Street: European financial centers can lure refugees from the tightly regulated New York markets, and the big European banks can start offering customers the all-in-one service that their US rivals won't be able to anymore.
