Via New York Magazine, a tale of woe and regret, tinged with more than a little bitterness:

To comply with the looming regulations, banks have begun stripping themselves of the pistons that powered their profits: leverage and proprietary trading. In the wake of the crash, Morgan Stanley and Goldman Sachs converted to bank holding companies to tap the “discount window,” the Fed’s pipeline of cheap funds that gave the banks an emergency source of liquidity. That move seemed smart then, but the stricter standards required of banks have now left them boxed in.

With all the major banks unable to wager their own funds on big bets, there’s a growing sense that the money that was being made during the Bush boom won’t be back. “The government has strangled the financial system,” banking analyst Dick Bove told me recently. “We’ve basically castrated these companies. They can’t borrow as much as they used to borrow.”

Dawwww. Poor babies. Do you have the sense that they still aren't living in reality? You'd be right. They're not.

Now, with a glut of hedge funds and an industrywide belt-tightening, bank chiefs are calling their star traders’ bluffs. “If you’re really unhappy, just leave,” Morgan Stanley CEO James Gorman bluntly told Bloomberg TV a few days after his bank announced its meager bonus numbers.

For New York’s bankers and traders, the new math suddenly reordered their assumptions about their place in a post-crash city. “After tax, that’s like, what, $75,000?” an investment banker at a rival firm said as he contemplated Morgan Stanley’s decision. He ran the numbers, modeling the implications. “I’m not married and I take the subway and I watch what I spend very carefully. But my girlfriend likes to eat good food. It all adds up really quick. A taxi here, another taxi there. I just bought an apartment, so now I have a big old mortgage bill.” “If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now,” says a hedge-fund executive. “You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.”

And arrogantly, they thought Republicans would be on their side. While it's true that Mitt Romney remains best friends with Wall Street, others have taken a decidedly populist stand; namely, Newt Gingrich, which has shocked denizens there. I loved this quote:

“There’s a real sense the world is changing,” says a private-­equity executive with deep ties to the GOP. “People are becoming aware there’s real anger out there. It’s not just some kids camping out in some park. The Romney attacks caught everyone by surprise. We have prepared for this to come from the Democrats in the fall, but not now. You could run an entire campaign if you’re Barack Obama with ads using nothing but Republicans saying things about finance that you’d never hear two months ago. It’s an amazing thing.”

It seems that Dodd-Frank, for all of its flaws, is turning the industry on its collective head. Even hedge funds are affected, with one hedge fund manager lamenting that they could no longer count on investors "being dumb."

The entire article is a terrific long read. I highly recommend it. I was surprised to see these bankers actually taking Dodd-Frank seriously, and even more surprised to discover that Dodd-Frank is actually forcing the banking and financial services industries to actually assess how they're doing business and whether they can sustain their current business model. The answer to that last question seems to be a resounding "no", which I count as victory for Dodd-Frank.

In all of the quotes and storytelling in this article, there's still the arrogance of an industry that still doesn't fully understand what they've done to people. Like this:

In October, a thousand protesters stood outside John Paulson’s Upper East Side townhouse and offered the hedge-fund billionaire a mock $5 billion check, the amount he earned from his 2010 investments. Later that day, Paulson released a statement attacking the protesters and their movement. “The top one percent of New Yorkers pay over 40 percent of all income taxes, providing huge benefits to everyone in our city and state,” he said. “Paulson & Co. and its employees have paid hundreds of millions of dollars in New York City and New York State taxes in recent years and have created over 100 high-paying jobs in New York City since its formation.” The truth was, Paulson was furious that the protesters had singled him out. Last year, he lost billions of dollars on bad bets on gold and the banking sector. One of his funds posted a 52 percent loss. “The ironic thing is John lost a lot of money this year,” a person close to Paulson told me. “The fact that John got roped into this debate highlights their misunderstanding.”

Awww. Poor John Paulson. I'm wondering whether or not he understands what happened to most people in 2008 with his "bets" on the housing market. Does he understand how many people lost homes, jobs, life savings? Sure, he lost a lot of money, but I'm certain he has quite a bit of money left, unlike the millions who paid the price for his high-stakes gambles on the housing and credit markets.

The takeaway from this piece ranges from skepticism to a sense that perhaps Dodd-Frank is a day of reckoning for these guys. Whichever way you read it, I agree with Salon's Andrew Leonard:

But regardless of which reading you choose, the piece itself is amazing if only for the plethora of quotes from bankers lamenting how the times have changed. There’s a self-awareness of the fact that the country headed down the wrong road, that maybe, just maybe, there was something wrong with all the easy money. Wall Street sounds chastened. Whether or not the Occupy movement, or Dodd-Frank, or the bad economy is most responsible for this reality is impossible to say, but for now, let’s call it progress.