Skip to comments.Regulators Vote to Back Volcker Rule
Posted on 12/10/2013 11:18:58 AM PST by oblomovEdited on 12/10/2013 11:20:11 AM PST by Admin Moderator. [history]
WASHINGTON—All five regulatory agencies put to a vote and approved the Volcker rule on Tuesday, ushering in a new era of tough oversight that drills to the core of Wall Street's profitable markets and trading businesses.
The rule will put in place new hurdles for banks that buy and sell securities on behalf of clients, known as market making, and will restrict compensation arrangements that encourage risky trading. The Fed also approved an extension to give banks until July 2015 to comply with the rule, though firms will be expected to make "good faith" efforts to get into compliance earlier.
(Excerpt) Read more at online.wsj.com ...
I’d rewrite the headline to read “Regulators Once Again Think They are Smarter Traders Than the Weasels Who’ve Been Doing it for 35 years and who have Guaranteed Immunity Against any Type of Financial Fraud”.
I’d rewrite the headline to read: Goldman Sachs is Pissed!
That actually makes me happy.
There are good, common sense reasons to adopt something like the Volcker Rule.
But it should be duly passed by the Congress. Not imposed by fiat by unelected bureaucrats.
They will just extend it again when the time comes. This rule does not do squat anyways. It is just a distraction from what should be done. To put back in place Glass-Steagall. If they had not repealed it then the entire 2007 crash could not have happened.
I thought Congress gave authorization for the rule when they passed Dodd-Frank.
But unelected bureaucrats have done so much good for the world. Why, if it hadn’t been for unelected bureaucrats, the Soviet Union would never have collapsed under their weight.
>>If they had not repealed it then the entire 2007 crash could not have happened.
Disagree. You think more regulation will solve our problems? What gives the government the legitimacy to regulate the financial industry anyway? Because five bureaucrats voted that they could?
Why not simply end all mortgage subsidies, and all implicit guarantees behind Fannie/Freddie and the rest of the financial system? The 2008 financial non-crisis was predicated by the expectation that the FedGov would not allow the bankruptcy of Lehman. The market was almost right...
Marxism marches on unimpeded in Obamaland.......
There is scant evidence that Glass-Steagal would have made a difference.
Regulatory agencies voting? They just implement the law already voted on by Congress. This is a slippery slope caused by delegating Congress’ legislative powers to the Executive Branch. Not good.
Exactly. They made the USSR ripe for Reagan’s plucking.
Glass-Steagal would have prevented the AIG mess, which is what really made the melt-down cause government intervention.
The government was content to allow Lehman to go down in flames. That roiled the commercial paper market something fierce, but the government was still content to sit on the sidelines.
When the AIG exposure came to light, however, then the government jumped in with both feet. And AIG was able to do the stupid-on-steroids that they did because of Glass-Steagal being removed.
Without the implicit government backing of Fannie/Ferddie mortgages, AIG would never have been able to issue CDOs as they did.
We need to abandon “industrial policy” in the financial sphere...
I think NAR and homebuilders would be screaming bloody murder. They would be back to building cookie cutter houses and turning existing McMansions into multifamily housing..
How would G-S have prevented the AIG default? It’s not clear to me.
I disagree with posters who say that this is a good rule, or common sense.
The rule prohibits banks from taking risks. It does not define what is risky, and what is not. You just can’t define that in a law.
Obviously, banks do not try to make losing risks.
The Volcker Rule allows banks to buy as much sovereign debt (government debt) as they wish. One might ask, is all sovereign debt not risky? How about Greek bonds?
This is the sort of rule that one would expect from a government which does not even understand what is meant by insurance.
The way to handle the banking problem is to let banks who make foolish investments fail. Instead, the government has bailed out some, but not others, and demanded that all the surviving banks agree to take government supervision. Heck, it was government pressure which caused the housing crisis in the first place, but then the banks were blamed. The most careful banks were then taken to courts and shaken down for billions of dollars in fines, as if they (the careful ones) had done something wrong.
This is the government who pretends that a simple rule (don’t act risky) will solve everything, as if bankers dont know something about risk.
Millennia ago Lao tse is said to have spoken thus: The greater the number of laws, the greater the number of thieves and brigands. We know where the laws are origination, and that the thieves and brigands are not far away.
There is no law which can tell you what is risky and what is not. This rule is just an excuse for taking to court and shaking down any bank which happens to lose money. So, how likely is it that banks will give loans to investors in new innovations? That would be risky! But if they buy government bonds, that is not risky. At least, but buying only government bonds, the banks diminish the risk of being attacked by the government. Thus all the capital will be diverted (as most of it already is) into covering government debt, and perpetuating the inflation machine. We will be increasing our diet of seed grain.
When I consider moves like this, I really see no way out, and no way to avoid a disaster. The only investment that considered safe by the regulators, will be in government bonds. The only way to build new plants, especially innovative ones (and innovation is always risky) would be to get government grants. Welcome to the socialist future.