Just How Powerful Are The 'Big Four' U.S. Banks? - Obama’s impotent assault on Wall Street.

[BridgeTheGap]

On January 21, in an abrupt change of policy, President Obama announced his intention to take on the big bankers who have brought us so much trouble. “If these folks want a fight, it’s a fight I’m ready to have,” he said with a clenched jaw at a press conference.

The president’s conviction seemed genuine in no small part because at his back, figuratively and literally, the president had Paul Volcker, the former Fed chairman and economic éminence grise. Arguably the most respected man in all of finance--and a lion held at bay (or in a far away office) over the past year by the president’s closest advisers--Volcker has devised two simple rules to defang our financial system. First, no bank would be allowed to engage in “proprietary trading,” in which it takes risks using its own capital in ways that are completely separate from services provided to clients. Second, there would be a cap on the size of our largest banks, relative to the size of total liabilities in the banking system. “Too big to fail” would finally become “too big to exist.”

After a long struggle, it would seem the president has become convinced that our financial sector has grown dangerous and needs to be reined in. It has long been clear that the framework in which bank executives are rewarded for taking huge risks during boom times, and taxpayers are punished for such excesses during bad times, is not sustainable. And now, the hubris of top bankers--spurning audiences with the president and paying themselves huge bonuses, despite White House protests--has finally caught up with them. Even Wall Street cannot moon the giant and get away with it. The course of financial-sector reform is corrected.

Yet, for all of Volcker’s good analysis, his presence does not necessarily change anything. To determine if the Obama administration is serious about solving the underlying crisis in finance, we need to get past Volcker’s totemic visage and examine the substance of his rules. Burrowing a bit deeper, unfortunately, we find out how little would actually change.

https://www.tnr.com/article/politics/shooting-banks