ABC News reports: “Five U.S. regulatory agencies are voting on the so-called Volcker Rule … set to be approved Tuesday.”
WILLIAM K. BLACK, blackw at umkc.edu
Black is an associate professor of economics and law at the University of Missouri-Kansas City. A former bank regulator who led investigations of the savings and loan crisis of the 1980s, he is the author of the book The Best Way to Rob a Bank is to Own One.
Black said today: “The ‘Volcker Rule’ represents Glass-Steagall-lite. It cannot work because it avoids doing what Glass-Steagall did — creating a ‘bright line’ rule separating what was permissible from what was forbidden. The failure to simply repeal the repeal of Glass-Steagall and repeal the Commodities Futures Modernization Act (which created the regulatory ‘black hole’ for financial derivatives) demonstrates how FDR was willing to act boldly because he learned the correct lessons from the Great Depression whereas both of our parties have acted timidly in response to the Great Recession. The result will be the worst of all worlds. The five largest U.S. banks do virtually all of the financial derivative trading by U.S. banks. They run massive proprietary derivatives trading desks that speculate in hundreds of trillions of dollars in derivatives. The Volcker Rule, in an effort to limit the evasions that are made inevitable by its failure to act boldly and ban derivative derivatives, will reportedly be over 850 pages. It will be a nightmare for bank examiners and honest banks, yet the big cheating banks will easily evade it by calling their speculation ‘hedging.’”