Friday, January 22, 2010

The Volcker Rule: Is Goldman Sachs The Big Winner?

"I’m proposing a simple and common-sense reform, which we’re calling the
‘Volcker Rule’–after this tall guy behind me. Banks will no longer be allowed to
own, invest, or sponsor hedge funds, private equity funds, or proprietary
trading operations for their own profit, unrelated to serving their customers.
If financial firms want to trade for profit, that’s something they’re free to
do. Indeed, doing so–responsibly–is a good thing for the markets and the
economy. But these firms should not be allowed to run these hedge funds and
private equities funds while running a bank backed by the American

That was President Obama yesterday.

Is the bank tax payer-funded party over?

Banks supported by tax payers and profiting by trading for themselves has been a flabbergasting aberration for the last year or so (not to mention the moral hazard).

Indeed, while these "banks" traded, markets ceased to function as they should.

Bill Cara today says that prop trading is a simple conflict of interest, which is the "fundamental reason that the financial system (the sell side) destroyed itself as well as the wealth of owners of capital (the buy side)". He says "We need the Volker Plan."

Shall the Volcker rule come to exist, banks will either have to be a commercial bank or an investment bank, but bot both. Bank of America will have to unload and revert its Merryl Lynch acquisition (was that a forced marriage?). This might be complicated, but sure it can be done.

Bear Stearns and Lehman Brothers no longer exists. Shall Goldman Sachs officially go back to this camp, will not they be the biggest winners?

Paul A. Volcker Bio

Paul Volcker served in the federal government for almost thirty years during five presidential administrations. Appointed as chairman of the Board of Governors of the Federal Reserve System by President Jimmy Carter in 1979, he was re-appointed by President Ronald Reagan in 1983. After leaving the Federal Reserve in 1987, he became professor of international economic policy (now emeritus) at Princeton University and served as chairman of the firm of James D. Wolfensohn & Co. until his retirement in 1996. Recently he has been called upon to lead an independent investigation into the Iraqi Oil for Food Program of the United Nations and a review of the World Bank's anti-corruption efforts, and he now serves as chairman of the President's Economic Recovery Advisory Board. He is chairman of the Board of Trustees of the Group of 30 (G30), an international organization which examines the impact of economic and financial decisions by the public and private sectors. As chairman of the first National Commission on the Public Service (the "Volcker Commission") in 1988 and the second Volcker Commission in 2002, he established himself as one of the nation's strongest advocates for the revitalization of the public service.

Stumble Upon Toolbar


Jack Reylan said...

If securities rules applied to federal research grants, half the professors would be in jail! Obama's constituencies are universities, lawyers and unions. The universities are in it for the grants. Any Republican that votes money for universities is a traitor. Climategate is what happens when universities become addicted on federal grants for research, so they invent catastrophes like Y2K or global warming to extort a bigger fix of money.

UPI June 6, 1992 Sovern took over at Columbia after student protests of 1968 and New York's fiscal problems in the '70s resulted in less financial support for the school, a situation made more dire by recent federal government budget cuts. . . But Columbia will be looking for a new president in a period troubled by criticism for destroying records that were being reviewed for improprieties. Universities in general have been under greater scrutiny for how they charge the government for federally sponsored research.

Columbia's financial engineering graduates are just programmers pretending to be quants just like their industrial engineers are mostly actuaries.
No other academic department is more responsible for the destruction of both the American banking and automobile industries. Those Trotskyites never believed in American economics and just faked it. You don't see them saying anything how Japan collapsed form all their good advice and you don't see them admonishing their fellow reds in China for bad quality.

They love third world students because they don't expect the professors to work for the tuition! Surely You Are Joking Feynman p 215 "If I ask you a question during the lecture, afterwards everybody will be telling me, 'What are you wasting our time for in the class? We're trying to learn something. And you're stopping him by asking a question'."

Columbia Civil Engineering is controlled by the mafia, which is why all the famous professors whose surnames started with S up and left. Engineering is the only Columbia library that does not check id so mafia contractors can go without a trace.

The Shocked Investor said...

Jack, interesting comment, but may I ask what does this have to do with the post?

Financial TV

Blog Archive

// adding Google analytics