Volcker: If #banks think it’s too complex, ???they have no one to blame but themselves,??? $XLF $GS & the usual suspects


The NYT article draws upon the drastic change that has been experienciing  “Volcker Rule” since its proposal, almost a year ago.

The measure, named for Paul A. Volcker, the former Federal Reserve chairman who proposed it, that aims to restrict the ability of banks whose deposits are federally insured from trading for their own benefit.

Last year, when the Dodd-Frank Wall Street Reform and Consumer Protection Act went to Congress, theVolcker Rule that it contained took up 10 pages.

Last week, when the proposed regulations for the Volcker Rule finally emerged for public comment, the text had swelled to 298 pages and was accompanied by more than 1,300 questions about 400 topics.

Wall Street firms have spent countless millions of dollars trying to water down the original Volcker proposal and have succeeded in inserting numerous exemptions. Now they’re claiming it’s too complex to understand and too costly to adopt.

The article also touches on the issue of Bank conglomerates, lack of competition and concentration

… “Paul wanted to take an aspect of risk-taking out of the financial conglomerates. That’s a worthy endeavor. But the history of regulation shows that the private sector pushes back and waters it down. Dodd-Frank didn’t want to address the longer-term consequences of ‘too big to fail.’ The 10 largest banks held 10 percent of the assets in 1990; today they control over 70 percent. This trend accelerated in 2008. The ‘too big to fail’ got even bigger.”

“My view is that we should break up the big financial conglomerates and separate investment banking,” he continued. “Otherwise we’re going to have ongoing government intervention in the credit allocation process. That threatens economic democracy, and the U.S. is the last bastion of economic democracy.”  

The point is -and it seems I’m not pointing out anything original with this idea- is that why not simply ban commercial banks from trading their own funds and bring the separation back to the structure regulated by the Glass-Steagal Act?

Former Senator Kaufman, Congressman Welch and Mr. Kaufman are all part of a chorus calling for a return to the separation of commercial and investment banking once embodied in the Depression-era Glass-Steagall Act, which was repealed in 1999.
“The need for 300 pages of rules just shows you’re trying to define something indefinable,” Mr. Kaufman said. “I think Paul Volcker is great, but let’s step back and ask, why are we doing this? We‘re doing this because we don’t want banks with federal deposit insurance to be involved in risky investments. There’s a simple solution. We didn’t have that problem for over 60 years because we had Glass-Steagall. It worked, we changed it and guess what, we got into trouble. I want to go back to what worked for 60 years. That’s a very conservative position.”
It makes complete sense to get back to basics. 

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