Women are fading from the U.S. finance industry.

In the past 10 years, 141,000 women, or 2.6 percent of female workers in finance, left the industry. The ranks of men grew by 389,000 in that period, or 9.6 percent, according to a review of data provided by the federal Bureau of Labor Statistics. The shift runs counter to changes in the overall work force. The number of women in the U.S. labor market has grown by 4.1 percent in the past decade, outpacing a 0.5 percent increase in male workers. The difference is pronounced at brokerage firms, investment banks and asset-management companies. [...]

[Y]oung women are becoming more rare in the country’s banks, brokerage houses and insurance companies. Since 2000, the number of women between the ages of 20 and 35 working in finance has dropped by 315,000, or 16.5 percent, while the number of men in that age range grew by 93,000, or 7.3 percent.

From a round-up of studies showing women are better investors than men, as they are likely to have lower short-term returns but are much better at avoiding catastrophic losses:

Women made fewer investment mistakes and were less likely to repeat them — or at least to admit to survey takers that they repeated them. [Merrill Lynch] said its results showed 35 percent of women said they had held a losing investment too long, while among men it was 47 percent. The worst part: Of those who did it once, 48 percent of the women and 61 percent of the men admitted to doing it again.

Similar gender differences turned up on other issues: 13 percent of women and 24 percent of men said they had bought a hot investment without doing any research. The men were more likely to repeat that mistake. “Everyone makes mistakes,” said Hannah Grove, chief marketing officer of Merrill Lynch Investment Managers. “Successful investors learn from theirs.”

The numbers come from a telephone survey of 1,000 people with household incomes of at least $75,000 and investable assets of at least $75,000. They jibe with what other surveys and studies have found.

Terrance Odean, a University of California at Davis professor who also has studied the issue, found women earn slightly better returns because they trade less frequently. Men, he says, are overconfident. That showed up in the Merrill Lynch survey, too. Women were more likely to say they are not knowledgeable about investing and more likely to rely on a financial adviser. Other studies show men are more willing to take risks and invest more aggressively than women.

Many executives spent the weekend trying to assess the impact of the legislation, which has yet to take final form. With some crucial differences between the House and Senate versions of the bill remaining, lawmakers will confer over the next few weeks and try to reach a final version before Congress’s Fourth of July recess. But Wall Street’s initial verdict seems to be that it could have been much more draconian.

“If you talk to anyone privately, there’s a sigh of relief,” said one veteran investment banker who insisted on anonymity because of the delicacy of the issue. “It’ll crimp the profit pool initially by 15 or 20 percent and increase oversight and compliance costs, but there’s no breakup of any institution or onerous new taxes.”

And just how big is that profit pool? In 2009, Goldman Sachs made $13.4 billion, JPMorgan Chase made $11.73 billion and Wells Fargo made $7.99 billion. Bank of America and Morgan Stanley both had bottom-line profits but attributed losses to investors — $2.2 billion and $907 million respectively. And Citigroup lost $1.6 billion. All in all, in a rather rough year for banking, those six firms made $28.4 billion. Losing 15 percent would have brought that number down to $24.1 billion — about the size of California’s budget deficit, for a sense of scale.

All in all, he or she guesses that Dodd will cost the banks a few billion dollars — a rounding error over the course of a decade. And the most worrying word in the quote is “initially.” In Wall Street’s mind, the Dodd bill will ultimately have little impact on profits — and thus little impact on the profit motive — going forward.

Sen. Blanche Lincoln (D-Ark.) has written an aggressive proposal to regulate the derivatives market. (WDCpix)

This week, Sen. Chris Dodd’s (D-Conn.) financial regulatory reform bill moved to the floor of the Senate. And with that bill close to passage, Wall Street and lobbyists turned their attention to Sen. Blanche Lincoln (D-Ark.) and the Senate Agriculture Committee’s proposal to regulate derivatives, a $450 trillion market and a major source of investment-banking profits.

[Economy1]Derivatives are essentially a type of financial insurance. They let two parties trade a contract derived from the price of some underlying security, currency or commodity. For instance, say you were a major airline. You might go to your bank to purchase a derivative locking in the price of gas, just in case a summertime oil shortage pushed up prices at the pump. In this case, you would be an “end user,” meaning you actually take delivery of the good. About 90 percent of the derivatives market involves financial firms trading derivatives like credit-default swaps back and forth for profit — and just 10 percent involves end users, non-financial firms using derivatives to mitigate risk.

Still, end users have become the unlikely center of the fight on derivatives legislation. With the reputation and credibility of big financial firms weak, companies in industries from agriculture to aviation came forward to say that this legislation might not only dampen big business’ profits but also hurt them. On Tuesday, the U.S. Chamber of Commerce and other business lobbies — via a group called the Coalition for Derivatives End-Users — took to the Hill for a flurry of meetings between corporate representatives of those worried end users and members of Congress.

“The legislation has the potential to take hundreds of billions of dollars out of the economy through margin and capital requirements,” says Cady North, a lobbyist at Financial Executives International and a member of the Coalition for Derivatives End-Users’ steering committee. “We estimate that the bill could require up to $900 billion in capital expenditures.” Moreover, the Coalition argues, the bill will increase the cost of derivatives for end users. (The Coalition declined to provide a list of participating executives or their companies, or a list of the legislators or assistants with whom they met, and the Chamber of Commerce did not respond to repeated requests for comment.)

But there’s just one problem. The Lincoln bill forces financial firms to put up collateral and use clearinghouses when they trade derivatives, but specifically exempts end users from those requirements. Banks are using their end-using clients as proxies to help kill off the legislation, lawyers and lobbyists contend. And for most end users, the opposition to the bill makes little sense.

Other lobbying organizations representing end-using white-collar companies said they had no issues with the legislation. For instance, Michael Griffith, a legislative analyst at the Association for Financial Professionals, which represents 16,000 of “the folks that manage your average companies’ money,” says he has no issues with it. “We’re pretty happy with what the Agriculture Committee approved,” he says. “It has a broad end user exemption on it, and we haven’t had many complaints from our members.”

“I know the banks are screaming about it,” says Brian Kalish, the director of AFP’s finance practice. “[My members are] getting panicky emails from their bankers. But [of] my members, no one’s panicking.”

But this week, some end users got more than panicky emails from their banks. Lawyers and lobbyists say that banks clearly misled companies about how the legislation might impact their business costs. In one case, a derivatives broker told a company that the legislation would force it to pay the same fees and put up the same collateral as financial firms, even where it explicitly would not.

“I’ve heard of a few folks who use derivatives [as end users who] called up their banks to talk about the legislation,” another lobbyist said. “Of course, their bankers told them to expect the whole market getting disrupted, price increases, collateral calls. Now, for most of them, they’re buying swaps to hedge. The legislation specifically exempts them.”

Legislators this week repeated the concern. Senate Banking Committee Chairman Dodd said he sees evidence of the bankers’ influence when end users lobby him. “The end users have been basically used by the major investment banks,” he told the Huffington Post’s Ryan Grim on Tuesday.

Indeed, Lincoln took pains to ensure most end users are not impacted by the legislation. Some firms with “captive finance entities” — financial-products divisions within big, diversified companies, like Cargill — might not qualify as end users on some transactions, and might have to post collateral when they use derivatives to speculate rather than hedge. But they represent a small proportion of end users, who represent a small portion of derivatives users.

Furthermore, the legislation might eventually drive end-users’ costs down. Many derivatives experts — off of Wall Street, at least — believe that Lincoln’s reforms will increase competition and transparency, reducing prices. Robert Litan, a derivatives expert at the Brookings Institution, explains, “In a world of nontransparency, the world the derivatives market is in right now, the way I understand it, if you try to call four or five dealers, to shop around, none give you a real price. They might quote you an indicative price. If you commit, then they give you pricing information.”
The White House concurs. Jen Psaki, the deputy communications director, recently argued, “The unregulated OTC derivatives markets were at the center of the recent financial crisis. The Wall Street banks that dominate this market want to keep it unregulated so they can make money off regular firms.”

Makes you proud to be a capitalist, doesn’t it?

The New York Times reports today that insurance company AIG has already burned through $123 billion it got from the Federal Reserve. The company told the government it was solvent in September. The only explanation for running through that kind of money one month later would be hidden accounting problems, analysts say. The company could be taking the $85 billion line of credit from the Fed plus $38 billion in additional government help and using it to cover previously undisclosed losses. From the Times:

These accounting questions are of interest not only because taxpayers are footing the bill at A.I.G. but also because the post-mortems may point to a fundamental flaw in the Fed bailout: the money is buoying an insurer — and its trading partners — whose cash needs could easily exceed the existing government backstop if the housing sector continues to deteriorate.

Edward M. Liddy, the insurance executive brought in by the government to restructure A.I.G., has already said that although he does not want to seek more money from the Fed, he may have to do so.

Here’s what I’d tell Liddy, and any other banks with their hands still out, if I were in charge of this mess: Tough luck.

If AIG wasn’t honest with its books, why should it get even more money from the government? AIG wasn’t worried about those accounting losses when it spent $443,000 at a resort and spa, just after getting its loan. The securities industry isn’t the slightest bit apprehensive about doling out $20 billion in bonuses this year — which no doubt ranks as its worst year since the Great Depression. Imagine the performance reviews for top investment bank executives. Sure, our company failed or was nationalized by the government. Here’s your bonus.

The only government official taking some action on this appears to be New York Atty. Gen. Andrew Cuomo, who sent a letter to the nine banks partially nationalized by the government demanding detailed information on bonuses for top executives this year.

Good for him. As Sen. Bob Dole used to say, “Where’s the outrage? The financial industry seems to be making a joke of the dramatic and unprecedented aid it received from the government. In the meantime, homeowners with their loans underwater are on their own, with the government only now mulling a plan to help them that appears to comprise little more than offering lenders another carrot to participate in loan modifications. And the White House already is saying it’s made no decision on supporting it.

The moral hazard argument, it seems, applies only to people in foreclosure. On Wall Street it no longer exists.

As The Washington Post explained, two of the world’s biggest investment banks are basically about to disappear, with Lehman Bros. filing for bankruptcy and Merrill Lynch being bought by Bank of America. Once the shock of all this settles today — and the markets begin to react — questions will begin anew about whether the Federal Reserve should have stepped in here, the way it did to rescue Bear Stearns in March.

But if today’s news isn’t unsettling enough, consider this possibility. Maybe the Fed didn’t step in because it couldn’t. Yes, the Fed decided over the weekend to loosen its lending practices a bit, to keep cash flowing. But that’s all.

But, maybe the Fed is, as they say, out of powder. Maybe it decided the government no longer has endless pockets to rescue failing banks — even those as big and venerable as Lehman Bros. and Merrill Lynch. Maybe there’s no backstop anymore.

Whatever the reason for the Fed’s decision, it’s clear Wall Street is on its own now. Keep your eye on the markets today; it should be a bumpy ride.