The surprise of the (watered down) Volcker rule truly shocked our oligarchs. [Jan 27, 2010: Bloomberg - Financial Oligarchs Completely Stunned by Volcker Rules] Obviously there was some teeth to real regulation being considered a month ago but the market did not like it, and now we run the entire country on what the market wants. And our friends at 85 Broad are the most important private player behind the market - when they throw temper tantrums all must be halted. Judging from the recent strength in the stock - even on a down day like today - the bank lobbyists have 'done good' and now we are getting the typical song and dance... something to trumpet the peasantry, but with almost no impact. [Feb 2, 2010: Senator Shelby - We Don't Need no Stinkin' Volcker Rules] A watered down version of what was already a watered down proposal.
Fully backstopped via taxpayer hedge funds within investment banks - only in Cramerica.
Via NY Post:
- The Obama administration is backing off a plan to bar commercial banks from engaging in proprietary trading, favoring instead a watered-down version of a key tenet of the proposed Volcker rule governing how banks operate, according to people familiar with the situation.
- Sources told The Post that instead of issuing an outright ban on prop trading -- or trading done on behalf of only the bank itself -- the White House will propose that federally insured banks keep higher cash reserves if they want to run such trading desks.
- The about-face comes amid signs the administration faced an uphill battle selling lawmakers and Treasury officials on an outright ban. (please check the campaign contributors of these lawmakers for the real reason behind said rejection)
- The Volcker rule had problems almost from the start, with Volcker and Deputy Treasury Secretary Neal Wolin having difficulty explaining the proposal and its necessity to the Senate Banking Committee. (that probably speaks more to what type of people are sitting in our Congress than anything else...)
- ....even as a group of former Treasury secretaries, including John Snow, George Schultz and Paul O'Neill, threw their support behind the prop-trading ban, Volcker himself is said to be only somewhat optimistic about his proposal's chances
- .. in the month since the announcement stunned Wall Street, sources said Volcker's ideas have been marginalized and are not expected to figure prominently in whatever the Senate formulates in the coming days. My understanding is the White House really does believe in it, but Treasury and the Hill do not, so it's not going very far, said one person close to the Treasury Department. Added another source, the White House is looking to save face by backing a proposal with fewer restrictions. The administration will spin the compromise as a way to add safety to proprietary trading, a source said. But this is a fundamentally different approach to regulation [than what Obama proposed].
I wonder how often Tim Geithner think about his name plate at his future employers - my gosh, the amount of work he is doing for them, he should be paid more than Dimon and Blankfein combined.
- Said a Treasury spokeswoman: We continue to work with congressional members from both sides of the aisle to bring financial reform across the finish line -- and to do all that we can to ensure that the American people are never again forced to suffer the consequences of a preventable financial catastrophe.
- Treasury Secretary Tim Geithner has been described as lukewarm to the proposal.
Well, I for one, feel better now (ahem)