It is no great surprise that banking reform has passed through the US Congress. Given the current public mood of “bash the bankers”, the only surprise is how much the final legislation is compromised.

Banking reform is both good news and bad news.

The good news is that some old-fashioned stability has been restored to American banks, making another banking crisis on the scale of 2008 less likely – but still by no means impossible.

The bad news is that this could only ever be done by making the banks more risk averse and less profitable. Since small business is particularly risky, making the banks more risk averse makes them less likely to invest in us.

At the same time, less profitable banks will have less money to loan to small business.

So the great irony of the bank reform that was motivated mainly by anti-banking public feeling is that the banks themselves will actually be stronger as a result of it, but small business will be worse off.