Thursday, January 28, 2010
Big Bank theory
Part of the FT "we like Volcker" series. Can you tame the big banks by ruling that deposit-taking banks can't engage in proprietary trading or own hedge funds or banks, or is this just a populist play? Obama has failed to rein in big finance and still supports the Clinton-Bush deregulators, Summers, Bernanke and Geithner, and this move comes on the back of election rejection and Republican boasts that they opposed the 2008 bailouts. What about the other bricks in the Wall St system - regulatory arbitrage, use of shadow banking to evade controls on leverage and balance-sheet expansion, the transformation of money markets from clearing and smoothing operations to supplers funds for major speculation, and OTC credit derivatives with no pricing mechanism except bribed credit rating agencies?