Volcker Rule Could Wait Until 2022

With supporters and opponents of the much-debated financial reform bill emphasizing the urgency of the moment, one crucial component of the legislation may be delayed for years.

Bloomberg News reports this morning that banks could be given until 2022 to implement the so-called Volcker Rule, which would force the nation's largest banks to reduce their investments in private equity and hedge funds.

Proposed by former Federal Reserve Chairman Paul Volcker, the rules were originally intended to stop banks from using taxpayer-backed cash to speculate in the financial markets. The measures were softened in the conference committee process. As HuffPost's Shahien Nasiripour pointed out, the final language allows banks to invest up to 3 percent of their Tier 1 capital in private equity and hedge funds. JPMorgan Chase, for example, could use $4 billion of its cash to speculate in the markets.

The rules wouldn't take effect until 15 months after passage, Bloomberg News reports, but with particularly hard-to-sell securities like real estate holdings, banks could be granted extensions until 2022.

As Goldman Sachs Group analyst Richard Ramsden put it, "While this may lead to further surprises down the line, we see this as important, as financial institutions have time to adapt their business models."

The changes in the final Volcker Rule language were backed by a last-minute change of heart by the Treasury Department, TPM reports. The loophole, pushed by Sen. Scott Brown (R-Mass.), whose support was seen as crucial in the vote-counting process, allows banks to invest in outside hedge funds.

Comments

[Geria]

01:31 PM on 07/11/2010

What Volcker should have proposed is the re-issue of the Glass-Steagal Act which forbids commercial banks from investment trading. It is a clean break from the practices that will still lead to financial blowouts under the "reform" bill. This Act was passed under the FDR Administration and saved banking for the benefit of borrowers and savers, a necessary first step to economic recovery. The elites still want the US to fail.

[hobo62]

06:59 AM on 07/01/2010

Give then 5 years and we be bailing again. Enough is enough. If the current Congress can'y pass meaningful legislation then they need to be replaced first.

[changling]

08:14 PM on 06/30/2010

These bankers and our representatives must think we are all stupid. I am tired of the posturing and game playing with our futures. These bankers/financial players turn on a dime for an investment or good gamble and they can turn on a dime to behave. Do the big regulation now. We need it for America to move forward. It can and should be done.

[hobo62]

07:34 AM on 06/30/2010

Latest Dow report. "Wall Street" up. "Main Street down".

[chaupper]

10:22 PM on 06/29/2010

Banks are no longer interested or focused in the lending biz.. they have the full faith and force of our treasury to trade futures and martingale to zero without risk. They can not lose... their margin call is a bail out. Banks will make record profits from trading activities... their banking license is a sham.

If you had the ability to average down with unlimited bank, no risk and no limits why would you do anything else?

Markets are engineered and managed by the exchange by way of circuit breakers to gradually go down. Just like intraday swings without these artificial controls an oversold market would violently drop. With these circuit breakers in place the markets will halt and at least give banks an opportunity to protect their positions.

These intervening actions in a sense manipulate the free market. From the 90's on the general deep pocket hedge fund strategy was holding long and scalping short. Markets tend to want to retrace 50% over the long haul. Our Government regulators through rule changes have engineered a financial market that can not withstand even a 33% retracement.

Banks can now freely trade derivatives with 30x1 leverage using savings deposits and their losses are insured by the FDIC. The previously carefully engineered long trending market has changed. Our government has authorized banks and trading companies to gamble with deposits, pensions covering the risk without any profits being returned to the investor. Straight out robbery.

[KIampfbeobachter]

06:16 PM on 06/29/2010

The value of financial modeling. It will take 12 more years for the housing market to stabilize. So the banks need these 12 years to hold on to the repossessed properties to sell them at a profit to them.

[William McKibbin]

05:49 PM on 06/29/2010

We are witness the overthrow of America by banks and global enterprises -- and the Congress is lining its pockets along the way -- the American way is coming to an end -- all is lost -- the situation is becoming hopeless for ordinary people who are not members of the emerging landed gentry of America (i.e., banksters, civil servants, and media moguls)...

[dizmo4]

05:48 PM on 06/29/2010

Considering that the final piece of legislation has not even passed, i think all of this speculation on what may or may not happen is a bit premature.

Its also worth noting that items that may be pushed beyond the 15 month timeline are limited in scope -- real estate securities. The current market and demand for these securities is nearly non-existent so it does make some sense to give longer that 15 months on this particular item.

2022 is the maximum time that they could receive, its not what the WILL receive.

[Lakesideboy]

04:46 PM on 06/29/2010

I've also thought about leaving this country - seriously.

So Hedge fund brokers/Wall Street & banks are being given another 20 years + to suck us dry and further eliminate the working class. Yes, robots will replace us (if you think I'm kidding continue using the self check out at the grocery store & Home Depot). The rich have no need for the working class with their upcoming robotic empire & servants.
Science fiction isn't so far off.
Obama, you really disappoint me.......

[Lakesideboy]

04:51 PM on 06/29/2010

Just keep on watching Fox news people and see how the GOP has created this channel to make Democrats and Obama the bad guy (who seems to be giving in which is why I'm disappointed - I think his intentions are good) so that they (GOP) can drain this country of it's wealth. THEY are the ones controlling and manipulating the U.S. world markets and banking systems.

Carl Rove created the religious right allegiance with the GOP so that most God fearing and uneducated people in this country think that they are on the right/Godly side, but they are sorely, sorely mistaken.
I really feel that they could have had the last election, however, they needed the Democrats and Obama to take the heat for the dire mess that George W. Bush (or should I say, they) created.

Hollywood couldn't even make this stuff up.......

[Intolerantcentrist]

07:43 PM on 06/29/2010

Yes, the Republicans coddled Religious Right, or is it the other way around…

By the way, Carl Rove is not responsible for the creation of the alliance between these two groups. This alignment has been in the works for some time. It was the alliance between Republican Party and the Religious Right that helped to elect Ronald Reagan and George H. W. Bush to the Presidency. Rove simply used what it was already in existence as a political tool.

Agreed: Hollywood can’t make this stuff up. And theirs usually has a happy ending.

[ItzGid]

04:06 PM on 06/29/2010

Perhaps the best solution is simply to leave the country. Everyone. All at once. We'll consider ourselves refugees, fleeing from the oppression of a government that only supports corporations. Let them have it. Of course, we could accomplish the same thing by camping out on capitol hill and screaming for months on end until someone decides to pay attention, but the apathetic resignation fostered for 8 years of Shrubbery has made any civilian uprising of any kind highly improbable.

[KIampfbeobachter]

06:20 PM on 06/29/2010

If you do this long and loud enough you will face a Xe-unit (ex Blackwater) with machine guns and live ammo.

[Oxonian2001]

10:22 PM on 06/29/2010

Ooh...like...like Tiannamen square?

[bayviking]

03:41 PM on 06/29/2010

The IMF program calls for cutbacks in government support for health care, pensions and a wide range of other public services. It also calls for weakening labor market regulations that provide workers with job security.

In exchange for providing this dismal advise the IMF is distinguished by the exorbitant benefits it gives its economists. Under the IMF’s pension program, many staffers can retire in their early 50s with six-figure pensions. The folks who missed the housing bubble and destroyed Argentina can lounge around the tropics at age 51 on their $100,000 a year IMF pension. A street drunk giving economic advice would be at least be more honest.

excerpted from Dean Baker @ Counterpunch

[stape45]

03:32 PM on 06/29/2010

Saturation has finally occurred. The guy no longer has gray matter - he now has tan matter.

[MadAppraiser]

03:01 PM on 06/29/2010

When you hold the best hand time is unimportant. Time is very important when you are unemployed. The sheriff is on the way, and your belongings are on the front lawn.

I have great difficulty comprehending how American citizens with their butts in the wind can embrace, and feel comfortable with Washington political scholarship under the heel of Wall Street interests. More than 96% of American citizens are on the outside of real economic solvency. America’s economic movers and shakers quietly laugh at confused cohorts of their economic ideologies that are bankrupting America!

[mrJJ]

02:41 PM on 06/29/2010

OT:
Banks Financing Mexico Drug Gangs Admitted in Wells Fargo Deal

Source: Bloomberg

Just before sunset on April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 miles east of Mexico City. As soldiers on the ground approached the plane, the crew tried to shoo them away, saying there was a dangerous oil leak. So the troops grew suspicious and searched the jet.

They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million. The stash was supposed to have been delivered from Caracas to drug traffickers in Toluca, near Mexico City, Mexican prosecutors later found. Law enforcement officials also discovered something else.

The smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.: Wachovia Corp. and Bank of America Corp., Bloomberg Markets reports in its August 2010 issue.

This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers -- including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

http://www.bloomberg.com/news/2010-06-29/banks-financing-mexico-s-drug-cartels-admitted-in-wells-fargo-s-u-s-deal.html

[MakeAWish]

03:23 PM on 06/29/2010

http://dealbook.blogs.nytimes.com/2010/06/29/money-laundering-the-drug-problem-at-banks/

Why wasn't this story on HP?

[VictoriaP]

01:47 PM on 06/29/2010

continued open letter to
To: Ann Marie Habershaw [mailto:[e-mail]]
Sent: Tuesday, June 29, 2010 10:00 AM

continued:

The recent financial reform is a joke that leaves the American people MORE exposed more than ever to the criminals on Wall Street. Rich people don’t pay taxes and we “small people” pay our taxes in blood. The blood of generations of hard work, savings, doing all the right things, the blood of our small businesses that are gone, the blood of the earth in the Gulf Coast and the blood of the animals and people who will never again be able to exist in that region.

Now, with no jobs and unemployment at 10%, along with a worsening economy, you want to give amnesty to tens of millions of illegal immigrants, right!

Eff you and your party, Ann Marie.

Signed,
A FORMER Democrat

[TeaPartyVoter]

02:14 PM on 06/29/2010

Fanned 10x.

[stape45]

02:56 PM on 06/29/2010

Obama has had eighteen months as POTUS. If Bush's presidency had only lasted eighteen months, there would be no need for this discussion.