You all know I have a serious hard....umm....problem with the major banks. Ever since bank deregulation back in the 1990's their focus has increasingly turned to pulling in as many deposits as possible, then "investing" that pot of money to make themselves a hefty profit. Sure, they still make some loans, but if they have a chance to make trades for their benefit (in hedge funds, packaging/selling derivatives, etc) vs making a loan, well, borrowers are just SOL.
It's sort of like a spoiled rich kid going to Vegas with daddy's credit card. As long as he's winning, it's "party like there's no tomorrow!" But if his luck runs out and the "knuckle draggers" come looking for him, then he's back at daddy's door wanting a bailout.
For a decade the banks were on a hot streak, making billions and paying themselves handsomely. But in '08 it all hit the fan and they came knocking (desperately banging?) at the taxpayer's door, wanting a bailout. This led to the passage of the Dodd-Frank (banking reforms) Act*. It's taken 5 years, but it looks like we're finally going to see the bankers get a solid spanking.
The five major financial regulators (FDIC, Federal Reserve, Securities & Exchange Com, Commodities Futures Trading Com, and the Comptroller of the Currency) will tomorrow vote on the "Volcker Rule" which will prohibit banks from trading for their own gain (known as "proprietary trading") and limit their investment in hedge funds. If the regulators stick to their guns this will curb bank risk-taking and avert future Wall Street taxpayer bailouts.
Bankers of course don't like this at all because it will hurt their bottom line and make a big dent in their HUGE bonuses. Collectively they have hundreds (thousands?) of lawyers and lobbyists scrambling right now to try and devise ways to fight the Volcker rule, or at least get some loopholes inserted that will allow them to get back to business as usual.
I'm hoping the regulators won't knuckle under to the special interests who would throw us all under the bus if they could make a buck for themselves in the process.
Heehee....I love watching bankers squirm and squeal. :)
S
* Ironically named after Sen. Chris Dodd and Rep. Barney Frank, two of the bankers most proficient enablers during their go-go years.
A very apt analogy there.
ReplyDeleteRight on!
ReplyDeleteWhat I care about most is learning when the Feds are going to raise interest rates and stop punishing those of us who are trying to save enough for our retirement.
ReplyDeleteBanks should raise money and loan it out at a higher price than their cost. Let brokerage firms and investment firms play with risk.
ReplyDelete*Nods head in agreement*
ReplyDeleteAll I know about the Dodd-Frank Act is that we have to do a training module on it every year at work. :)
ReplyDelete