Volker and Obama’s team had a falling out early in administration as he saw his advice ignored.
True, with limited tools available to Central Bank / the Fed and in typical economic contraction move designed to curb price inflation the old-fashioned way, he has dramatically raised interest rates to make consumer and commercial borrowing prohibitively expensive, which in turn made the double-dip recession inevitable.
The U.S. would be mired in that recession forever were it not for Ronald Reagan's deregulation and tax-rates reforms, so Mr. Volcker has been sharing in the credit and basking in the light of that post-recession glow ever since, just like Bill Clinton appropriating most of the credit for better economic times and deficit reduction that followed Newt Gingrich Revolution and passage and implementation of most points and tenets in the Contract with America which included capital gains reductions and corporate tax credits, deregulations and welfare reforms.
Glass-Steagall was just one of those regulations that have outlived their time and usefulness, if it were ever needed at all. Barney Frank threw out the trial balloon of blame for the mortgage meltdown on the G-S repeal (aka Gramm-Leach-Bliley Act), in a desperate attempt to shift the blame from the role that he and the long line of other Democrats played in mortgage fiasco and point the finger on Republicans by diverting attention from GSEs, HUD, CRA and mandates that demanded that the banks give more and more unqualified loans to larger and larger groups of unqualified recipients (it goes way back to FDR and the Fannie Mae, which was created to finance the mortgage loans issued by FHA, thus effectively creating first MBS market) .
Let's remember that Glass-Steagall didn't save the economy from the booms and busts in the financial sector or real-estate / mortgage sector, the latest of which has occurred in the early 1990's just few years before the repeal. Mostly smaller T&Ls and S&Ls were affected and went out of business then, while larger (TBTF in today's parlance) banks survived and went on to prosper. G-S Act was useless anachronism of over-regulation and laws of 1920s and 1930 and was unnecessarily stifling the U.S. banks from competing with much larger integrated diversified international banks that were draining capital from American banks. G-S didn't prevent the LTCM (Long Term Capital Management) financial crisis of 1998 borne of wrong bets on the interest rates by before-then-unknown hedge fund run by several recipients of Nobel Prize in Economics.
Repeal of Glass-Steagall turned out to be a blessing during mortgage meltdown of 2007-2009, because it were those integrated consumer-and-investment diversified ("TBTF") banks that best survived the credit and liquidity crisis, while the large and small single-purpose banks that didn't have a stream of alternate income failed (e.g., compare integrated BoA, BNY Mellon, Citi, JPMorgan, Wells Fargo with non-integrated Bear Stearns, Countrywide, IndyMac, Lehman, Merrill Lynch, Wachovia, Washington Mutual/WaMu...)
Before repeal, the money simply went into riskier, more profitable venues for investments (foreign banks, hedge funds like LTCM, Bernie Madoff, Soros, KKR, Forstmann Little, Bain Capital, Blackstone Group, BlackRock etc.) thus starving the commercial / consumer banks of lending and reserve capital, and creating the potential of greater crises due to ever larger pool of money involved in ever riskier investments, e.g., LTCM, Barings Bank...
And, as a logical extension of this capital and profit drain, commercial banks will have to find other sources of revenue, such as ATM fees, debit card fees, account balance fee, checks fees, service fees etc. etc. The return to the "good old days" of Glass-Steagall, eh? Politicians delight in that because too many people, from OWS crowd to many on the right, would lay the blame on the "evil banks" and "Wall Street fatcats," to the joy of Democrats who will be happy to "fix" the "problem" with another Sarbanes-Oxley / Sarbox or Frank-Dodd / FinReg type of "solution" - more, "tougher" laws and regulations.
True to an extent, but only because Volcker went even further in proposing regulations than those Obama's economic team felt was feasible to push through even with Dem-controlled Congress. Still, the "Volcker Rule" that is just now being implemented and the already-infamous "Durbin Amendment", which are parts of the Dodd-Frank FinReg law, have effectively restored the worst features of Glass-Steagall Act and are already causing the cash drain from the consumer-commercial banks and more U.S. investment banks are now putting money to better use (and profits) overseas. So don't mourn for Glass-Steagall, Durbin and Volcker saw to it that you will pay more and get less in financial services, and be at more risk, just like before Gramm-Leach-Bliley Act repealed it.
Some examples:
From Steve Wynn Shares 'Occupy' Movement's Frustration - CNBC, by Jane Wells, 2011 October 24
What's more, "That does not show that 25 to 30 percent of their profits are probably tied up in accounts receivable or inventory, stuff that they can't spend or get their hands on." As for what remains, minus cost of living, "They take whatever is left, these so-called 'millionaires', and they open up another shop or another office, and that is the only known engine of growth in the United States of America." Wynn says many young people in the Occupy movement don't understand this, and he's isn't angry with them for vilifying the wealthy. "But if it's a politician that does it, or a union leader, then it represents something much more pernicious. It represents a deliberate misleading of the public." Wynn says he's reluctant to expand in Las Vegas, even as his company continues to do so in China. He told analysts he's been approached by El Ad Properties about the 34-acre Frontier property across from the Wynn and Encore resorts on the Las Vegas Strip. El Ad bought the now empty lot from billionaire Phil Ruffin for a staggering $1.2 billion in 2007, but it hasn't been able to develop it. It stands as a vacant eyesore. ..... < snip > < snip > ..... Wynn called it "worse than hypocrisy" for the Obama administration to attack the rich. "Rich people are now being defined by the administration as people who make a million dollars." He says many business owners who net two or three million dollars pay personal taxes on that.
From Banks' bad omen - NYP, by Mark Decambre, 2011 October 14
The JPMorgan Chase boss is watching as a raft of finacial regulations, the weak US economy and Europe's debt crisis drain revenues and profits across his business.
The extent of his woes was on clear display yesterday when the nation's second-largest bank reported less-than-stellar results for the third quarter, underscoring the challenges facing JPMorgan and the other big banks. ..... < snip >
..... JPMorgan, which kicked off earnings season for the banking industry, doesn't bode well for bank peers that are struggling with a sharp fall-off in Wall Street business. In particular, the investment banking side is suffering from a serious trading slump. ..... < snip >
..... Going forward, JPMorgan said it's facing even more hurdles from new regulations that will restrict its trading operations as well as curb revenue from its retail banking business.
JPMorgan estimates that new rules regarding so-called swipe fees, which put a cap on the amount of fees banks can charge retailers, could cost it $600 million in profits.
Another regulation under the Dodd-Frank financial reform act, the so-called Volcker Rule that restricts certain types of in-house trades, could hit the bank to the tune of $300 million a year. ..... < snip >
Look at Europe and see who is asked to bail out the spend-thrift governments of Greece, Italy, Portugal, Spain et al. It were the "evil, greedy" banks that have been buying the bonds and loaned money to these governments who have lied about their spending and liabilities; now the banks are expected to take a "haircut" to bail out these governments, not the other way around. Yet the politicians are still trying to blame the financial industry in toto, instead of accepting and acknowledging that it was their unsustainable socialist policies that were at the root of the problems.
Politicians are playing people like puppets with their "fatcats" / "greedy banksters" / "lax regulation" slogans, and too many people are dancing to their tune, at the expense to themselves, from the loss of money to the loss of financial freedoms.