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Tag >> Volcker Rule
Jul 07

The financial crisis is only "on pause"

Posted by Ron F in Volcker RuleRiskRegulationObama Administrationfinancial market reformfinancial crisisCongresscomplianceBanksbanking reformBankingbailouts

Ron F

There's some additional recent work out there that's worth citing in connection with Karen's post on Tuesday.

In particular, I would point readers to the piece posted Monday on by Enrico Perotti, a finance professor at the Amsterdam Business School. Essentially, Perotti's piece explains why Kotlikoff's prescription is necessary. As it did the US Congress, the banking industry has fought off international attempts to get the so-called Basel Committee to force the industry to de-leverage its business model. And Kotlikoff's idea does exactly that, simply because mutual funds are financed entirely by equity.

Jun 28

Financial reform bill far from toothless

Posted by Ron F in Volcker RuleRiskPaul Volckerfinancial crisisderivativescredit default swapsCongresscomplianceCDSBanksbanking reformBankingbank failures

Ron F

While many critics claim the financial regulation bill that emerged from Congressional negotiations on Friday will do next to nothing to reduce the chances of another banking crisis, there are some limits on risk taking that could do just that.

The one that strikes me as the toughest and most critical is the so-called Lincoln amendment, which would require banks to separately capitalize their trading in credit default swaps, which were central to the recent crisis.

Jun 23

Why the financial reform bill will accomplish almost nothing

Posted by annearf in Volcker RuleIn compliancefinancial reformderivativescredit default swapsconsumer proection agency


The members of Congress in charge of creating a financial reform bill recently decided to remove majority voting for electing board members from the legislation and to include only a diluted version of proxy access for nominating board candidates, as my colleague Stephen Taub just discussed .

That latest cop-out underscores an increasingly obvious truth about this legislation: It's not going to change the financial system significantly nor will it do much to prevent another major crisis.

Jun 11

Crunch time for financial reform

Posted by Ron F in Volcker RuleRegulationPaul Volckerfinancial reformfinancial crisisderivativescredit-default swapcomplianceBernankeBanksBankingbailouts

Ron F

I'm as a big a fan of Paul Volcker as the next guy but am struggling to understand why he objects to the so-called Lincoln amendment. All it would do at the end of the day is force banks to separately capitalize their derivatives operations, as Simon Johnson explains today.

I can understand why the bank lobby is against the idea. More capital would make their operations less profitable. But that's also the only way to make them less risky as well.

Jun 02

Why deeper financial reform remains necessary

Posted by Ron F in Volcker Rule, unemployment, Timothy GeithnerRiskrecoveryrecessionPaul VolckerObama AdministrationGeithnerfinancial crisisCongresscompliancebubblesBanksBanking

Ron F

Despite the prospective "success" of financial reform legislation, my sense is that very little will change on Wall Street as the bills passed by the House and Senate are likely to emerge from conference committee. And that will prevent any economic recovery that isn't just another asset bubble in disguise.

The fundamental problem, or at least one such obstacle, as I see it, is that reform as currently likely will do little or nothing to restructure the banking industry, instead leaving it to regulators to impose new rules with which to limit risk.

May 15

Why Congress should ignore Bernanke & Company

Posted by Ron F in Volcker RuleSheila BairRiskRegulationPaul Volckerfinancial crisisderivativesCongresscomplianceBernankeBanksbanking reformBankingbank failuresbailouts

Ron F

I see that Ben Bernanke, Sheila Bair and even Paul Volcker are trying to convince Congress not to require big banks to spin off their derivatives operations, or make other fundamental changes besides getting out of proprietary trading, the so-called Volcker rule.

Bernanke, in particular, is defending the rest of the current set-up and insisting, in effect, that regulators can take care of all of the rest of the problems that banks that are too big to fail represent, with just a few technical changes involving leverage and capital reserves and the like.

Apr 08

The partial re-education of Robert Rubin

Posted by Ron F in Volcker RuleTARPRegulationPaul VolckerGoldman SachsGlass Steagall Actfinancial crisisderivativesCongressCitigroupBanksbanking reformBankingbank failuresbailoutsAlan Greenspan

Ron F

Better late than never, I suppose. But Big Bob Rubin has apparently had a change of heart as to the virtues of financial deregulation.

Appearing before the Financial Crisis Inquiry Commission today with former Citigroup CEO Charles Prince in his capacity as former vice chairman of the bailed out bank, Rubin expressed much different sentiments about the need to prevent banks from becoming too big to fail and derivatives from adding untold amounts of undetectable leverage to the financial system than he did when he was President Clinton's deregulator in chief.

Apr 06

Why financial reform is likely to fail

Posted by Ron F in Volcker RuleTimothy GeithnerRiskRegulationPaul VolckerObama Administration, Lehman Brothers, financial crisisCongresscomplianceBanksbanking reform

Ron F

With Congress expected to debate financial regulatory reform until the cows come home, lots of commentators are weighing in on what it must do to inhibit, if not prevent, an even worse financial meltdown. (And no, we aren't out of the woods, not by a long shot.)

Our own Marine Cole ventured into these waters last week with a piece on to what degree legislation as currently formulated would require bank regulators to toughen their capital reserve requirements. But there's a lot more to say about that, too much.

Feb 26

Why the Volcker Rule may be more effective than critics think

Posted by Ron F in Volcker RuleTimothy GeithnerRiskRegulationPaul Volcker, Obama, Goldman SachsGeithnerFederal Reservederivativescredit-default swapcomplianceCDSBanks

Ron F

A piece today by derivatives expert Satyajit Das helps put to rest some if not all of the doubts expressed about the Volcker Rule's potential efficacy.

Much of the criticism by those who say it doesn't go far enough focuses argues  that forcing banks that get deposit insurance to shed their proprietary trading operations would not necessarily eliminate systemic risk, since taxpayers could not afford to see huge trading operations bring down the markets even if their deposits were still protected. Mister Market is just too important for that.

Feb 25

Tim Geithner talks out of both sides of his mouth

Posted by Ron F in Volcker RuleTimothy GeithnerRegulationPaul VolckerGeithnercomplianceBanksbanking reformbank failuresbailouts

Ron F

Can someone please explain what Timothy Geithner really thinks about Wall Street? Today we get completely mixed messages from the Treasury about financial reform.

One the one hand, The New York Post and Bloomberg reported that the Treasury has succeeded in getting the White House to drop the so-called Volcker Rule, the proposal that is named after the administration's chief proponent, Obama advisor and former Fed chairman Paul Volcker, and would force banks that get deposit insurance to shed their proprietary trading operations and other speculative businesses.

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