Core Viewpoint - Major Wall Street banks reported strong performance in trading and investment banking for Q3, with an increase in lending activities, indicating a shift towards financing non-bank lending institutions and asset management companies [1][3][4]. Group 1: Financial Performance - JPMorgan Chase reported record quarterly revenues in its equity and fixed income trading businesses [3]. - Goldman Sachs and Citigroup also achieved their best Q3 performance in years, with Goldman Sachs' investment banking revenue increasing by 43% to $2.66 billion [5]. - Overall, investment banks' consulting and capital market revenues reached their highest level since the end of 2021, driven by active IPOs and a rebound in M&A advisory fees [5]. Group 2: Lending Trends - There is a notable increase in loans to non-bank financial institutions, which now account for 13% of total outstanding loans from banks [4]. - Analysts express concern that non-bank lenders are focusing more on trading assets rather than providing new financing for the real economy [4][6]. Group 3: Regulatory Environment - The Federal Reserve is expected to lower interest rates and may reduce capital requirements for banks, which could enhance their ability to engage in riskier lending practices [6][7]. - Concerns have been raised about "regulatory arbitrage" outside the banking system, with warnings that credit quality may deteriorate more than anticipated during an economic downturn [6]. Group 4: Market Outlook - There are fears that the U.S. economy may slow down next year, with a softening labor market, leading to potential increases in asset prices rather than resolving uncertainties related to trade and tariffs [7]. - Analysts suggest that U.S. regulators should focus on encouraging banks to create credit for the real economy rather than fostering financial bubbles [7].