It’s a tough time to be running a toll booth

Markets are right to be worried about America’s biggest lenders.

While investors are sitting on their hands waiting for crisis after crisis to blow over, there’s little chance of returning to the days when banks like Goldman could rake in billions simply by presiding over monstrous trading flows.

The same malady has hit other investment banks: when everyone is too scared to get in their cars and go anywhere, it’s hard to make money running a toll road, especially when regulators are demanding fancy new upgrades to your toll booths.

Little wonder that banks are frantically shedding staff and shifting their business models towards more even revenue sources like asset management.

But not fast enough: Goldman reported pay cost-cutting of 16 per cent over the quarter. Revenues from its trading division plunged 47 per cent.

Bank of America/Merrill Lynch also saw revenues drop in its flow business, while the top line elsewhere mostly held up and its advisory unit delivered its best performance since the merger.

But BoAML has bigger problems – namely a hangover of legal headaches that show little sign of abating, fuelling speculation that the bank will need to raise more capital before long. That’s a far cry from the grand talk of a dividend boost late last year.

In short, you either have to be a singular optimist or a great believer in the genius of banks’ senior management to keep pouring money into these injured flow monsters.