Volcker Rule: Each Ending Is A New Beginning For Banksters And Their Lobbyists

As we mentioned Monday, all but one Republican (Walter Jones) voted to exempt private equity fund investment advisers from regulatory registration and reporting requirements. They were joined by 36 Democrats led by Wall Street whores Steve Israel ("ex"-Blue Dog-$800,019) and Jim Himes (New Dem-$1,853,26). Ever since Boehner became Speaker, whittling away at Dodd-Frank has been top priority-- and he knows there are always a couple dozen corrupt Democrats to tag along for the goodies. Conservatives hate the Volcker Rule banning high-risk bank trades but it was something Boehner, the GOP and the ConservaDems weren't able to stop on Tuesday.

The Fed and the FDIC (Federal Deposit Insurance Corp) each voted unanimously under guidelines set by Congress before Boehner took over. Oregon Senator Jeff Merkely was one of the most outspoken and effective advocates of the rule and his office released this statement by him and Carl Levin, a cosponsor of the provision during the crafting of Dodd-Frank:

“We fought for the Merkley-Levin provision of the Dodd-Frank Act in order to put a strong firewall between banks and hedge fund-style high-risk trading. Today is a big step toward that goal. We are still reviewing the details of the final rule, but early indications suggest that persistence and common sense can prevail in the face of even the fiercest special interest lobbying campaigns: hedging looks tougher, market-making looks simpler, trader compensation remains appropriately structured, and CEOs are required to set the tone at the top. No regulation is ever perfect, and we will carefully monitor implementation and hold regulators and firms accountable. If problems emerge-- for whatever reason-- we will quickly press regulators to address them. Overall, though, the final rule looks improved over the proposal from two years earlier.

“The Merkley-Levin Amendment was intended to change the culture and practices at our nation’s largest financial firms, to prevent Wall Street and the big banks from making swing-for-the-fences bets that put depositors and taxpayers at risk. The regulators have taken a serious step forward in mandating critical changes.”

Hedge-fund style proprietary trading at our nation’s largest financial firms was a high-risk, conflict-ridden activity that played a central role in the 2008 financial crisis. Banks should be in the business of serving customers-- including taking deposits from and making loans to ordinary families and businesses. Speculative investing should be left to hedge funds, private equity funds, and other private investors that, if they get in trouble, won’t imperil the lending so critical to our economic growth.

The Volcker Rule firewall, as embodied in the Merkley-Levin Amendment to Dodd-Frank:

• Bars our lending banks and their affiliates and subsidiaries from engaging in the speculative, conflict-ridden activities of making bets on the stock, bond, derivatives, and other markets and limits those activities at systemically important nonbank financial institutions;
• Allows for customer-oriented services, such as underwriting and market-making to facilitate capital formation for clients, risk-mitigating hedging activities to permit safe and sound operations, and fund management services for customers.

Wall Street is not happy. They fought the Volcker Rule at every opportunity and spent millions bribing (legalistically bribing, I guess) Members of Congress to kill it. It didn't work and they and their allies are fuming this week

Regulators' tough stance heralds a new era and new approach for financial markets, CLSA banking analyst Mike Mayo said.

"The big picture is that this ushers in an era of Big Brother banking," with regulators closely monitoring details of top banks' risk-taking, Mayo said. "Big Brother was asleep on the couch before the financial crisis." The new policy reflects Congress' decision that the banking system needed to be "de-risked, de-leveraged and to deliver more consistent financial results," he said. As part of the same overall effort, bank regulators are boosting capital requirements for banks internationally.

…The biggest arguments recently have been about how much trading should be allowed to hedge positions, especially since banks typically have more deposits on hand than they have loans outstanding, with the rest of their assets usually invested in the markets. They also typically own securities as part of legal activities such as executing client trades and making markets, he said.

Liberal-leaning groups such as Better Markets have lobbied for the toughest version of the rule possible, arguing in a Nov. 21 letter to the agencies that allowing too much trading to let banks hedge risks will allow proprietary trading via loopholes. They pointed to JPMorgan Chase's $6 billion-plus loss in the "London Whale" derivatives trade as evidence that trading that banks say is simply a hedge can pose risks to the system. New rules would hurt access to credit far less than another crisis, they said.

"Wall Street and its lawyers are in the loophole creation-and-exploitation business," Better Markets' Dennis Kelleher said. "For 100 years, banks have made the same complaints about every regulation. They said it during the Depression, and we grew the biggest middle class in the history of the world."

President Obama's statement:

Five years ago, a financial catastrophe on Wall Street was rapidly fueling a punishing recession on Main Street that ultimately cost millions of jobs and hurt families across the country. So as we prepared steps to rescue our economy and put Americans back to work, we also put in place tough rules of the road to make sure a crisis like that never happened again-- rules that reward sound financial practices, allow honest innovation and strengthen the financial system’s ability to support job creation and durable economic growth.

As part of this Wall Street reform, we fought to include the Volcker Rule-- a rule that makes sure big banks can’t make risky bets with their customer’s deposits. The Volcker Rule will make it illegal for firms to use government-insured money to make speculative bets that threaten the entire financial system, and demand a new era of accountability from CEOs who must sign off on their firm’s practices.

Our financial system will be safer and the American people are more secure because we fought to include this protection in the law. I thank Paul Volcker, a former Chairman of the Federal Reserve and advisor I trust, for helping to create this important safeguard. I also thank Secretary Lew and the regulators who worked diligently to finalize the rule by the end of this year as we called on them to do. I encourage Congress to give these regulators adequate funding to effectively and efficiently implement the rule, which will help protect hardworking families and business owners from future crisis, and restore everyone’s certainty and confidence in America’s dynamic financial system.

One of the biggest Wall Street whores in Congress is New Jersey extremist Scott Garrett, Wall Street's fully-owned Republican on the House Financial Services Committee. While sitting on the committee, he's taken a tidy $1,235,537 in bribes from the financial services industry. So far this year, he's the 4th biggest recipient of bribes from securities and investment area, beaten out only by Boehner, Cantor and Tom Cotten (R-AR), another corrupt member of the Financial Services Committee and a candidate for the U.S. Senate. He ran right to Fox Tuesday to whine about the rule: