Obama wants Volcker rule, fudges on consumer agency
News organizations getting previews of Obama's Manhattan speech today submit reports suggesting he'll fight hard for a "Volcker rule" in any reform bill. The Volcker rule would ban or sharply limit Wall Street banks using their own capital to gamble on the markets. The rule is one of five bullet points that the New York Times says will be in the speech. The others are roll-up authority for failing firms, pension reforms, derivatives "transparency" and "stronger consumer financial protections."
That last item sounds kind of wishy-washy. Republicans hate the proposed Consumer Financial Protection Agency. It sounds like the speech will not explicitly ask for the agency's creation, which suggests that Obama would be willing to dump the idea if he gets support on other measures. In any event the agency is less important than the Volcker rule, derivatives reform and roll-up power.
Comments
1. Restore Glass-Steagall (undo Graham-Leach-Bliley from 1999)
2. Outlaw credit default swaps (undo the CFMA 2000)
3. Reform the ratings agencies so they are paid by the purchasers of securities, not the issuers.
4. Reform the SEC that turned the ratings agencies into a gov sponsored oligopoly with a 1973 rule change, and increased permissible leverage from 15:1 to 30-40:1 with a 2004 rule change.
5. Enforce existing antitrust law from 1994 prohibiting any one bank from owning more than 10% of the nation's deposits. Banks routinely are either exempted from this or exploit loopholes.
You can pin the the entire debacle of the last couple years on some very bad legislation at the start of the decade both of which had HUGE bi-partisan support (thus the reason neither party can point the finger without implicating themselves) that rested on top of failure to apply common sense anti-trust law and a corrupt ratings system that gave AAA ratings to bundled garbage.
The bill in its current state is a public placebo to give politicians the ability to run for re-election as tough on Wall St.
Posted by: Josh Dowlut | April 22, 2010 2:02 PM
I am concerned as to how the dialog on the Volcker Rule went from "The physical seperation of commercial banking from investment banking" to "Banks can't use their own capital to gamble on the markets". Seems like a shot of Scotch straight, "with water and ice on the side". If you leave the infrastructure in place, they will figure out a way to get around the rule.
Posted by: John Searles | April 23, 2010 8:31 AM
Thank GOD for these reform measures! Letting the banks in the markets is the root cause of our problems - like the wolf resides in the hen house...they never were allowed in our mks before -they change the bank act and allow them in...who among us cannot figure this out. The question is-"do our politicians care enough about America to bring about the necessary changes...and once again, dis-allow these "banks"? in our markets...do you care?
Posted by: Harv Millen | May 19, 2010 3:58 PM