Wall Street hates the Volcker Rule. Will Trump finally kill it?

Money CNN ^ | January 9, 2017: 1:32 PM ET | Matt Egan

[expat_panama]

Big banks shouldn't act like hedge funds by making dangerous bets that can ruin the economy.

That's the principle behind the Volcker Rule, a controversial part of the post-crisis Wall Street reform. The rule prohibits banks like Goldman Sachs or JPMorgan from making risky wagers with their own money and bans them owning big stakes in hedge funds or private-equity firms.

The banks hate it. Wall Street has bitterly complained about the Volcker Rule for years...

...named after legendary Federal Reserve chairman Paul Volcker, who came up with the idea and fought hard to include it in Dodd-Frank.

But recently, the push to defang the Volcker Rule received support from an unlikely source: the Federal Reserve itself...

...Creighton complained that the Volcker Rule has led to "massive costs inside financial institutions that make it harder to serve customers."

He said concerns about banks betting with their own money -- a practice known as proprietary trading -- have been resolved by "punishing" capital rules that make these types of trades unattractive.

"Prop trading is gone. We're not looking for it to come back," Creighton said.

Wells Fargo (WFC)CEO Tim Sloan specifically cited the Volcker Rule as one of many parts of financial regulation he wants Trump to dial back.

"You kind of scratch your head and say, 'Is there really a lot of added benefit to that?" Sloan said last month.

Even if Congress doesn't kill Dodd Frank, Trump could undermine it by picking regulators who choose not to enforce it.

"You could unravel the Volcker Rule by just downgrading enforcement of it," said Stanley.

We have to make things in America to make America great again. Tax reform is the key to making that happen.

[oblomov]

None of the things that the Volcker Rule proscribes caused the 2007 financial crisis.

Also, as a rule, “risky bet” = a speculation that a J-school B.A. doesn’t understand.

[Timpanagos1]

When the banks are playing with house money and any catastropic loss will be offset by the taxpayers, I can see why the banks would oppose the Volcker Rule.

[expat_panama]

Good morning investors!  What we got is stock indexes are beginning to scatter --the NASDAQ hits a new high (in faster trade) but the big cap S&P and the DOW pull back (in lower volume).  While these stocks are slowing/reversing from the top of their ranges gold and silver bounce back up from the bottom of theirs --now priced back up at $1,185.95 and $16.67.

Ironically futures traders see metals falling -0.05% and stock indexes up +0.05% but hey, that's barely moving at all.

Reports a half hour after opening: JOLTS - Job Openings and Wholesale Inventories.

fwiw:

Don't Be Sure That Infrastructure Spending Will Boost Growth Mihir Sharma, BBW

The Right Shouldn't Associate w/ 'National' Strategies John Tamny, RealClearMarkets

Prudent Things for Investors To Do w/ the Dow Near 20K Nigam Arora, MarketWatch

President Obama Was Officially Terrible for Hedge Funds Jen Wieczner, Fortune

How Excessive Risk Aversion Boosts Risk of Death Richard Rahn, Washington Times

Why Should Wealth Disqualify Those Eager to Serve In Government? Ira Stoll, NYS

Understanding the Republicans' Corporate Tax Reform William Gale, RealClearMarkets

[spintreebob]

risky wagers with their own money

HUD, FANNIE, FREDDIE, SALLIE should not exist to subsidize and guarantee risky wagers of anyone. Fixed it.

[taildragger]

How about Killing parts of if not all of Sarb-Ox, Dodd-Frank, and the 2 "reforms" under Clinton and Start over....

Has anyone here talked to Financial Advisers, Bankers etc on the down-low and heard what a pain in the arse these rules are and how they effect their business? I am not asking for the heady days of the late 90's with Advisers fresh out of school telling grandma and pa I can get you X% better than the market, the days of those cowboys are gone.

It is darn near clean sheet of paper time here people...

[Wolfie]

There should have been only one post crisis reform: Reinstate Glass-Steagall.

[expat_panama]

Reinstate Glass-Steagall

GOOD GRIEF!  T may have tried out that goofy idea a while back but my guess is the fact it's so stupid is why he hasn't mentioned it recently.  Pse let me know if you'd like me to share more about the nutz'n'bolts of that meme --it's (apparently) one of my hot-buttons.

[expat_panama]

Reinstate Glass-Steagall

GOOD GRIEF!  T may have tried out that goofy idea a while back but my guess is the fact it's so stupid is why he hasn't mentioned it recently.  Pse let me know if you'd like me to share more about the nutz'n'bolts of that meme --it's (apparently) one of my hot-buttons.

[expat_panama]

“risky bet” = a speculation that a J-school B.A. doesn’t understand...

My take exactly, or at least something some political hack can fool the party base with.

[Natufian]

All those Phd quants with their enormous brain power employed by the banks power the sub-prime speculation wasn’t too risky. Look where that got us.

[major-pelham]

Your point is well taken. If they want to use non-depositor money, i.e. their own equity fine, but they can’t invest in federal government securities or pseudo businesses like Fannie. Take that equity and put it in the commercial economy, not lobbyist vulnerable ‘fakey’ or ‘fakish’ assets.

[Jimmy Valentine]

Commercial banks are not investment banks and that difference needs to be reinforced.

[expat_panama]

...clean sheet of paper time...

That's what my watch says too.

[yefragetuwrabrumuy]

I think it would be best to make a few additions to the rule.

Only financial institutions that are *not* “too big to fail” can make such “gaming” investments. And they can only do so with their annual *net* profit, after taxes and payments to their investors and creditors, not with anyone else’s money.

This accomplishes several things. First of all, financial institutions that are “too big to fail”, are also “too big to survive”, so need to be broken up to protect the economy. So if they make poor choices with their gaming, they go broke and are out of business, owing nothing to anyone who will be punished in their bankruptcy.

Second, no gaming with anyone else’s money. They are willing to take the risks to get the rewards, so the risk must entirely be theirs.