"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.