Banks Gear Up for a Battle -U.S. Takes Aim at Proprietary Trading,-'the Volcker Rule'

Wall Street Journal ^ | FEBRUARY 2, 2010 | KATE KELLY

[Ernest_at_the_Beach]

U.S. Takes Aim at Proprietary Trading, But Just What is It?; 'the Volcker Rule'

The showdown over the future of proprietary trading by U.S. banks is about to begin. One likely fight: defining exactly what proprietary trading is.

Wall Street has been hungry for details ever since President Barack Obama proposed curbs last month that would limit the ways banks with insured deposits bet with their own capital. Some answers will emerge Tuesday at a Senate Banking Committee hearing where former Federal Reserve Chairman Paul Volcker is set to testify.

"There is a broad distinction between proprietary trading and responding to a customer requirement," Mr. Volcker said in an interview shortly after Mr. Obama announced his new initiative, which the president dubbed "the Volcker rule." Mr. Volcker's position helped shape Mr. Obama's position.

[tobyhill]

All banks have to do is stop loaning and claim that everyone is too big of a risk. They may die and not be able to pay the bank back.

[Dr. Thorne]

I agree with doing away with the prop desks at the banks. It sets up a conflict of interest with their clients.

However, this will have zero impact on our present economic situation.