Nomi Prins: Volcker Rule Made Meaningless by Abundant Exemptions

[marmar]

from truthdig:



Volcker Rule Made Meaningless by Abundant Exemptions

Posted on Dec 18, 2013
By Nomi Prins


The subject of heated debate in financial circles, the Volcker Rule, which was originally passed as part of the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act, was finally approved by regulators. It will begin taking effect in April 2014 with full compliance required by July 2015. They say the devil is in the details. Regarding the Volcker Rule, the devil is in the details of its abundant exemptions. These include a laundry list of practices and businesses that mega-banks have performed under one roof, since the 1999 repeal of Glass-Steagall, as well as the myriad perks they won along the way to that power-consolidating event.

The Volcker Rule in its current form ostensibly focuses on mitigating the “excessive” risk of proprietary trading at banks (which it doesn’t do well). Worse, it leaves all the other risky trading related activity that poses a far greater systemic threat untouched, such as:

1) Market making—the ability of banks to trade on behalf of clients or eventual clients, which is how they make the bulk of their trading profits, and thus create risk.

2) Underwriting—the creation of securities that can contain multiple layers of financial complexity, such as the toxic assets at the heart of the recent crisis.

3) Hedging—or the desire of banks to “protect” themselves through trading, which is virtually impossible to detect from any other kind of trading.

4) Trading government bonds.

5) Organizing or offering hedge and private equity funds, which involves trading and was theoretically to be prohibited under the original intent of the Volcker Rule. .......................(more)

The complete piece is at: http://www.truthdig.com/report/item/volcker_rule_made_meaningless_by_abundant_exemptions_20131218