Wall Street banks are indeed under pressure, but it's not the banks that are falling—it's their once-monopolistic position.

Looking back, why were banks so powerful? Three reasons—control over deposit pools, dominance in credit allocation, and the protective moat of regulation. Now, this logic is crumbling one by one. Deposits are fragmented across money market funds, government bonds, and stablecoins; lending business profits are squeezed thin by electronicization; and regulation has become more of a burden. The result is that ROE can't be improved, risks can't be avoided, and banks are increasingly like leveraged utilities—still alive, but with no power.

BlackRock has taken a completely different path. They avoid credit risk, don't use leverage, and don't bet on market ups and downs. Their sole focus is on determining the default flow of money. Once ETFs, pensions, and indexation become the market's "standard options," the pricing power automatically shifts away from banks. BlackRock, Vanguard, and State Street together have essentially become the invisible brain of the US stock market—no longer just financial institutions, but practically the financial system itself.

At its core, it's a clash of two eras—old finance makes money from balance sheets, which fail when the cycle turns; new finance profits from rules, channels, and path dependencies—so long as the system keeps turning, money keeps flowing in. The recent actions of the Federal Reserve over the past two years clearly illustrate this: they are rescuing the market system, not the banks. The real interface is on the asset side, bypassing traditional deposit and loan channels altogether.

In the long run, the landscape may look like this: banks become back-end support for clearing, custody, and compliance; asset management firms sit at the top, deciding where capital goes; the Federal Reserve and Treasury directly bypass intermediaries, targeting asset allocation.