UBS Scandal Is a Reminder About Why Dodd-Frank Came to Be

[ProSense]

UBS Scandal Is a Reminder About Why Dodd-Frank Came to Be

By ADRIENNE CARTER and BEN PROTESS

Although the UBS trading scandal happened at the London office of a Swiss financial company, big American banks will feel regulatory heat.

When UBS revealed on Thursday that a rogue trader had lost a quantity of money so large that it potentially wiped out profits for the entire quarter, the case cast a glaring spotlight on banks’ risk-taking activities and evoked painful memories of the financial crisis. Such blowups had helped bring the system to the brink, forcing governments to bail out banks and prompting a global economic slowdown.

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In the coming weeks, policy makers are expected to propose new regulations intended to limit federally insured banks from making bets with their own money, according to a government official with knowledge of the process. The rules — part of the Dodd-Frank Act, the regulatory overhaul enacted in the wake of the crisis — take aim at a practice called proprietary trading, in which companies speculate for their own gains rather than for their customers’.

While the industry has been lobbying aggressively to temper those regulations, the rogue trading case could give proponents of the so-called Volcker Rule, which would prohibit proprietary trading, more ammunition. UBS, which stands to lose $2.3 billion on the unauthorized trades, said in its initial four-sentence announcement on the incident that “no client positions were affected.” The implication was that the trader was using company money to place his bets.

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[ProSense]

1. No comment? n/t

[Tarheel_Dem]

2. K & R

[BR_Parkway]

3. Rouge trader screws bank out of billions, in jail within 24 hours - Rouge Bank

screws US public out of Trillions, worst punishment so far was a $25 fine on the old Countrywide guy