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 If they had not repealed it then the entire 2007 crash could not have happened.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If they had not repealed it then the entire 2007 crash could not have happened.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.
“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.”
It was duly passed by Congress, as part of Dodd-Frank. This is just the implementation of the Dodd-Frank provisions.
Good post and Lao tse is ignored to our great regret. At its heart the issue is risk management. Bankers, despite years of experience and training, are human and subject to the same emotions as all of us, including greed.
If the government hadn’t intervened interest rates would have skyrocketed, assets would have fallen in price, and some elements of the economy would have slowed and perhaps halted for a time. Is that worse than what we are now experiencing - zombie banks, government crony capitalism and dried up credit markets? The velocity of money, despite the brain trust at the FED is terrible.
Look at what happened after 9/11/01. Airline travel ended, but the country responded and things continued. Like a blocked artery little arteries grew up in response and people found a way. I believe that no government intervention would have cleared the decks, high interest rates would have pulled in capital from the US sidelines and overseas, and low asset prices would have attracted buyers for both properties and businesses.
The losers would have paid and the economy would be back on track, but government isn’t neutral. It’s made up of politicians who have sponsors and loyalty groups that sustain them. Intervention caused the collapse, intervention worsened the collapse and is currently shackling the economy.
The best government response would have been to “temporarily” lower the corporate tax rate to zero. All that repatriated money would have poured in and secured the market in months not years. GM is still a bankruptcy waiting to happen.
And now Barney Fag is arguing that it should not be implemented. He was for it but that was before he was against it.
“Id rewrite the headline to read: Goldman Sachs is Pissed!
That actually makes me happy.”
I’ll ditto that. These crooked “investment” bankers have plundered the USA and when they found themselves underwater because of reckless behavior, they had their politician shills in both Parties (except the TP) send the bill to us taxpayers and the US Treasury credit card to China. Their pals in the Federal Reserve even handed the banker’s wives newly printed hundreds of millions in cash to do with as they pleased.
The bankers make deals not products. They benefit and we lose. @#$% em.
Obama was as crooked and beholden as they are. They should have been bankrupted and imprisoned along with others like FME. Anything that will prevent a recurrence of their last scam I’m in favor. We still need accountability but they own those who will need to demand it. If we don’t start demanding honest responsive government first, instead of infighting about politics, our nation is going to whither away and die.
The 2007 crash was caused by Congress ORDERING banks to end financially discriminating against clients who the banks and anyone with sense knew could not pay back loans.
They’re going to wear the skids off those deck chairs!
I see no reason why the government should preference one asset class over others.
I see we have a bunch of bankers here.
Under the old rules there was a complete separation between investment banks and deposit banks. Therefore if an investment bank went down then it mainly took its casino players with it. There was no threat to the banking system as a whole and therefore there would never be any kind of taxpayer bailout.
Of course you Brilliant bankers seem to know more than the congress who created Glass-Steagall to prevent what happened in that day. And in your comments you have declared them idiots for their past effort. And of course it is worthless evidence to you that there was no repeat of the collapse leading to the great depression until your precious bankers got to mix and play with money and mortgages from the once separate banking sector. No collapse until the rules from the depression error were re-established. If Einstein was still here then he would remind you that the definition of INSANITY is doing the same thing over and over again and expecting different results.
Of course you are either Insane or else it is that your greed hopelessly blinds you.
Ditto, but that is fairytale. TPTB would have to end lobbying and asset manipulation by cartels...
And what you think you know is crap. But it is common crap. The idea that banks should be able to do whatever they want because that is capitalism is pure bull. And for very good reason if you would just think about it. You are being raped every day by them and you don’t even know it. Do you know what inflation really is? There is just far too much for me to explain. I don’t have the faith in Humanity anymore to do it. But if people would just pay attention then they might have learned something.
Glass-steagall left investment bankers to play in their capitalist world with their casino money. While it put trusted and common sense restrictions on banks that hold your savings, and your mortgages. It totally separated the two types of banks. It did not allow people who could give a Shi* about you to rape and plunder you. But unfortunately most of you chose to be raped and plundered and then call it good old capitalism. Somehow you have been brainwashed into believing that capitalism needs no rules. In such a world. The only ones left standing are those with the most power and biggest guns.
Capitalism creates its own rules, and a pro-regulation attitude has no place in the small government spectrum. Go hang out somewhere that has tolerance for authoritarianism.
Oh, and the phrase “common sense restrictions” gives your authoritarian tendencies away.
“common sense restrictions”
Oh so you think (for example) that restrictions on the amount of leverage a bank can take on while they are holding your funds is an authoritarian tendency. Whereas if they go belly up from that leverage then your funds evaporate and cannot be paid back to you. This is the problem with people like you(and you are far from alone) who think that Capitalism is a system that can exist without rules. Which is untrue because of the nature of Mankind and the fact that predators will take advantage of anyone weaker than they are. And because Mankind contains some very immoral persons who would have no problem taking your life savings out of your cookie jar and calling it capitalism. Which is the kind of capitalism that you advocate.
I think capitalism is great in that those who work hard can be rewarded, and they should be able to keep that reward as long as they achieved it legitimately. I Am an absolute hater of socialism that would say that one person has the right to steal that reward and give it to someone else. And I believe in freedom which is in direct conflict with authoritarian socialism which you accuse me of. But all systems must contain certain authoritarian conditions. If someone were to murder you and the law steps in to punish the murderer then what is that- other than authoritarianism?
The problem you have is in what your definition of capitalism is and your total denial of humanity as a predator. Capitalism does not have to allow others to put your money or your welfare at risk in a way that you did not authorize. It does not have to allow others such as bankers to use your resources in a scheme to get rich from your hard work if you did not explicitly authorize it. And it certainly should not allow bankers to steal from society as a whole through inflation or other bailouts. What that actually is- Is Socialism. You are advocating socialism while calling it capitalism.
Just one problem with liberalism is that it is a thoughtless condition. It is based on an unworkable pie in the sky mush that is separate from all reality. No logical or sensible thought process is required. And as such liberalism is a system that ends in total destruction.
You need to stop living with all the modern mush and start using your thinking process to really think deep and analyze reality. That is what the founders of this great nation did.
Without deposit banks the entire system could not function. It is beyond important that those banks are honest, stable, and reliable. Once again your blindness to common sense that causes you to advocate Anarchy in capitalism is all that you have. Your definition is as unworkable as any liberal idealism ever was. You will be crying when the entire system comes crashing down, as it will. Unfortunately you won’t have a clue how it happened. You will still be as blind as Elmer Fudd.
Riiiiiigggghhhhttt. Keep placing faith in your silly regulations and restrictions.
“Predatory tendencies are the only reason capitalism works.”
In your version of unrestrained Predatory behavior.. Mad Max comes to mind. I guess that is the kind of world you dream of. For a short time you may even get your way. At least until the next Hitler takes control.
Nope- I am done. Your kind of deeply thought out wisdom, and historical perspective is just too brilliant to be fixed.
Homebuilders. How is it that the size of the average family has gone down and the size of the average house has gone up?
I say follow the money. More money paid to heat, maintain and pay prop taxes. I remember when you had a living room. Now its a family room, a dining room that is used twice a year, a recreation room, rooms rooms rooms and nobody is using them.......well with this new odumbiconomy.....maybe its a good thing since kids and grandkids are gonna be coming home to live lol.
I would guess that with today's housing materials and more efficient environmental controls, energy bills aren't the major consideration they once were. Plus, I think everybody in the housing industry pushes bigger is better. The bigger the house, the bigger the commissions..
“Nothing the banks were doing before or after the crash interferes with the rights of the citizenry.”
I felt pretty interfered with when we had an international monetary crisis that cost us how much money(more than a trillion) and put my country and most of the rest of the world into an economic tailspin.
“Without the implicit government backing of Fannie/Ferddie mortgages, AIG would never have been able to issue CDOs as they did.”
Why not? They were free to be as stupid as they wanted. And there was big money being made if you ignored the risks. So what if your bank fails if you’ve been making 10 million a year. Not to mention that most of the supposed security was not from the government, but from the big wall street banks, the financial geniuses who bundled up mixed bags of mortgages, took them to their pals at Standard and Poor, got them rated AAA, and thus gave the credibility for people like AIG to issue the CDO’s. All involved made fortunes until the ballon burst and we were left holding the bag.
Reagan and Volcker, as chairman of the Fed, worked together to bring the US out of a decade of economic malaise. I think we should have the same confidence in Volcker that Reagan did.
So the banks had to give loans to anyone? What was the specific provision you are referring to?
Banks traditionally did not give mortgages to people with bad credit histories. Congress ordered them to make the loans available and end economic discrimination, because it supposedly wasn’t “fair”. So, they made them stop discriminating against historically poor people.
You have no right for your money or property to be worth X amount in a given market.
For the record, the term for what the banks was doing is called Redlining. Economically based redlining should be allowed, as people from poorer neighborhoods are less likely to pay back their loans on time. Congress tried to wipe it out and it ultimately backfired.
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