Friday, Mar 05, 2010
Barack Obama pushes on with controversial Volcker rule
Telegraph: Barack Obama pushes on with controversial Volcker rule
The White House has published a five-page draft legislative document, outlining for the first time the way in which the US President intends to rein in the riskier activities of certain banks. Nonetheless, the White House believes the Volcker rule should be implemented over two years, and block banks from takeovers that would give them in excess of 10pc market share. The rule will have to be approved by the House and the Senate, before being signed into the statute books by President Obama.
Posted by cat and canary @ 09:19 AM (588 views) Add Comment
5 Comments
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1. rumble said...
Rules, rules, rules... if we pile on enough of them, we'll be able to get anyone for something when we need to. US president is also getting greater power over the internet, a seeming new trend - Australia, France, UK.
2. icarus said...
From the testimony of Sheila Bair, Chairman Federal Deposit Insurance Corporation, to the Financial Services Inquiry Commission, January 2010:
The last major financial crisis—the thrift and banking crisis of the 1980s—resulted in enactment of two laws designed to improve the financial regulatory system: The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). Combined, FIRREA and FDICIA significantly strengthened bank regulation, and provided banks strong incentives to operate at higher capital levels with less risk, but these regulations have also created incentives for financial services to grow outside of the regulated sector.
In the 20 years following FIRREA and FDICIA, the shadow banking system grew much more quickly than the traditional banking system, and at the onset of the crisis, it's been estimated that half of all financial services were conducted in institutions that were not subject to prudential regulation and supervision. Products and practices that originated within the shadow banking system have proven particularly troublesome in this crisis. In particular, the crisis has shown that many of the institutions in this sector grew to be too large and complex to resolve under existing bankruptcy law and currently they cannot be wound down under the FDIC's receivership authorities........
And some banks themselves exploited the opportunity for arbitrage by funding higher risk activity through third parties or in more lightly regulated affiliates. As a consequence, if the thrust of reform is to simply layer more regulation upon insured banks, we will simply provide more incentives for financial activity to be conducted in less-regulated venues and exacerbate the regulatory arbitrage that fed this crisis. Reform efforts will once again be circumvented, as they were in the decades following FIRREA and FDICIA.
3. Crunchy said...
Greater power over the internet? 'Conspiraloons' win yet again. : )
4. 51ck-6-51x said...
Obama "wants a smooth running free market", so he impedes short-selling and banks running their own strategies ('prop')... so perverse. Yet many people on this site say the politicians do whatever the bankers want, this shows the converse, bowing to popularism. So sad.
5. rumble said...
Haha! Control free markets. Obama's doublespeak is off to a flying start.
Even if bankers do pressure politicians into submission, surely that's reason to remove power from politicians? Is it ok for the law makers to enforce the wants of an interest group? Spineless lawmakers equals rule by proxy.