Ex-Wall Street Banker: Volcker Rule Will Correct A Dangerous Mistake

Former Federal Reserve chairman Paul Volcker in 2009. Volcker is the namesake of the so-called 'Volcker Rule,' a piece of financial regulatory legislation that has attracted strong criticism from Wall Street.

Apparently not every banker hates the Volcker rule.

Roger Vasey, who used to be in charge of global debt markets at Merrill Lynch, penned a pro-Volcker op-ed in The Wall Street Journal this week. In the piece, Vasey argues that the Volcker rule "is necessary to correct a mistake that poses a danger to our economy."

The mistake he's referring to is the partial repeal of the Glass-Steagall Act in 1999, which removed the firewall between investment banks and commercial banks, making it easier for the latter to make large-scale speculative trades -- a practice that some claim worsened the financial crisis.

The Volcker rule, which is part of the Dodd-Frank financial reform package, is meant to limit banks' ability to make risky trades with taxpayer-backed money, a practice known as propriety trading. The provision is not very popular on Wall Street, where bankers and their lobbyists have done everything they can to water down the legislation and paint it as a hindrance to economic growth.

But as Think Progress notes, Vasey isn't the only banking veteran who's voiced support for the Volcker rule. John Reed, the former CEO of Citigroup, said in February that if anything, the rule as currently written still grants too much leniency to banks -- a view shared by many analysts, and by a group of Occupy Wall Street protesters who have called upon regulators to enforce a strong version of the law.

It's also the view of Paul Volcker himself, the former Federal Reserve chairman for whom the rule was named. Volcker has dismissed concerns voiced by bankers that the rule will restrict trading in certain markets, make it difficult for U.S. banks to compete with institutions in other countries and cost too much to implement.

"My short answer to each of these objections is: 'not so,'" Volcker wrote in a letter to regulators in February.

 

Comments

[Slagle Neoma]

11:01 PM on 05/25/2012

They can risk as much as they want of there money but NOT at the public's expense. For a long-term thriving economy you need rules or else the game is fixed and we know who's benefiting from it (they) and who has to pay for it (we). Whether it's pension funds to retail banking we need a firewall built to protect our economy and a nation as a whole.
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[blueken60]

10:42 AM on 04/19/2012

Gee, ever notice how people tell the truth AFTER they get out of the game? And we still don't get it. I am amazed. Go out and vote, it will scare the heck out of those dudes in Washington. Pay attention, demand more. Us 99%'rs are getting the short end of the stick. Let our voices be heard. VOTE

[John Denton]

10:23 AM on 04/19/2012

C'mon, people, Glass-Steagall is the cure. Reinstate Glass-Steagall!

[amcountertopfab]

06:54 PM on 04/18/2012

I am touched by the fact that the banks don't like the Volker Rule or other regulations because it interfere with their ability to make huge profits and infringes on their ability to compete with global banks. Never mind the damage and loss of jobs that were caused by their casino like business model this last time and forget about the billions of taxpayer dollars it cost to bail them out. It is my humble opinion that maybe we should just put a bounty out on these banksters and see if that helps them with competition.

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[Ryan Magdangal]

04:23 PM on 04/18/2012

Imagine baseball without umpires, or basket ball and football without referees. What would happen to the game? Same thing here. They can risk as much as they want of there money but NOT at the public's expense. For a long-term thriving economy you need rules or else the game is fixed and we know who's benefiting from it (they) and who has to pay for it (we). Whether it's pension funds to retail banking we need a firewall built to protect our economy and a nation as a whole. Somebody's got to man the store right? Remember after FDR there were NO BUBBLES in our economy for 50 yrs! (1937-1987) And then came the Reagan Devolution and De-regulation which has put us all at risk. Blind greed is evil because it destroys without conscience.

[idisVA]

02:55 PM on 04/18/2012

The VR must be further strengthen. Bankers are obstinate and down right greedy.

[Bufford P Tusser]

03:02 PM on 04/18/2012

You're much too kind.

[Tobias Lake]

06:14 PM on 04/18/2012

WAYYYYY too kind.

[rjlwis]

02:46 PM on 04/18/2012

Plus, bring back Glass Steagall.

[catcancook]

02:44 PM on 04/18/2012

Congress as it exist, will never side with the 99% and the x-bankers and give us the much needed Volcker Rule. The 99'ers have so much to loose and yet we really have no voice in the matter. Congress answers to the Banking Lobbies.

The only thing that could bring it about (maybe) is address it with everyone running for office and if they don't agree..vote the person who says they will vote for the Volcker Rule or we risk getting screwed big time again.

[p mersault]

02:40 PM on 04/18/2012

The Volcker Rule falls short because it only makes a law that a bank can't make these investments with its own funds, it does not create any real organizational barrier in doing so. The split needs to be full on, an actual divide of the institutions between depositing and investment, a split of the company itself into two separate businesses. Anything short of that will just be another rule no one enforces.

[ClarcKing]

02:26 PM on 04/18/2012

The United States is in crisis: the correlation between the repeal of Glass-Steagall and the meltdown of the banking industry can not be made. The continuing bailout system engineered by the Fed / Wall St. cabal is the most dangerous offensive conducted against the US ever! The Administration or the Congress has yet to discover their duty. Mr. Volcker, because he will not make the strongest statements necessary for the stabilization of the United States, is just about irrelevant to the nation's crisis.

The world monetary financial system is in disintegration, there is no way to fix it. Terminate the monetary financial system. The Fed members must be indicted. The Wall St. cabal, the recipient of $29 trillion dollars, that terrorize and corrupt the Congress, must be indicted, competently prosecuted, in order to establish justice, sanity and the stabilization of the United States.

The national security crisis demands the immediate implementation of the Glass-Steagall standard in US banking. Put the Fed into bankruptcy protection, recover the bailout trillions. Create the US national Bank, that funds the 50 states, then fund the necessary economy platforms, the redevelopment of North America, as proposed in the NAWAPA plan. Stop the Perpetual War policy, that expands and can go thermonuclear in an instant. No other options exist, and time is wasting.

[Bufford P Tusser]

03:06 PM on 04/18/2012

sure, looks good on paper.

Problem is we live in a financial dicktatorship, and we're the tators.