Republicans in charge: Bachus warns regulators on Volcker rule

Discussion in 'Economics' started by tmarket, Nov 5, 2010.

  1. Now that the deep in the pockets of big banks Republicans are in charge of the house, the in coming Republican front-runner to head a key U.S. congressional bank oversight panel has urged regulators to consider whether a new Volcker rule limiting risky trading by U.S. banks may handicap them globally, according to a letter obtained by Reuters on Thursday.

    Rep Bachus warns Geithner on "Volcker rule"

    By Kevin Drawbaugh

    WASHINGTON | Thu Nov 4, 2010 8:35pm EDT

    (Reuters) - The Republican front-runner to head a key U.S. congressional bank oversight panel has urged regulators to consider whether a new rule limiting risky trading by U.S. banks may handicap them globally, according to a letter obtained by Reuters on Thursday.

    In a sign of the policy position of the heir-apparent to the chair of the U.S. House of Representatives' Financial Services Committee, Representative Spencer Bachus raised basic questions in the letter about the impact of the "Volcker Rule" enacted into law in July.

    "If the Volcker Rule's prohibitions are expansively interpreted and rigidly implemented against U.S. institutions while other nations refuse to adopt them, the damage to U.S. competitiveness and job creation could be substantial," Bachus wrote in the November 3 letter to Treasury Secretary Timothy Geithner and other top regulators.

    The "Volcker Rule" is a provision of the landmark Wall Street reforms signed into law in July by President Barack Obama. The reforms won approval in Congress over the opposition of most Republicans, including Bachus of Alabama.

    The three-part rule curbs proprietary trading by banks unrelated to customers' needs; limits the involvement of banks in hedge funds and private equity; and imposes a new cap on the domestic expansion capacity of the largest U.S. banks.

    The rule is named after its author, former Federal Reserve Chairman Paul Volcker, an outside economic adviser to President Barack Obama. Details of the complex rule are being fleshed out by regulators and implementation will take place over several years.

    Separately on Thursday, the two main proponents of the Volcker rule in the Senate wrote regulators asking them to strictly enforce the rule and be vigilant about attempts to get around enforcement.

    Democratic Senators Carl Levin and Jeff Merkley wrote that, in particular, the rule should seek to stop banks from conducting proprietary trading under the guise of "market making."

    To police against this activity the senators said the rule should contain a time element, arguing the longer a position stays on a bank's books the more likely it will be viewed as a proprietary trade.

    They also argued that the rule should give regulators the authority to examine all trading accounts; otherwise, proprietary trades could take place in a type of account that is exempted from the rule.

    In a nod to the concerns raised by Bachus and others, Levin and Merkley urged regulators to press other countries to adopt policies similar to the Volcker rule.

    This is the second letter the senators have sent regulators. Last week they penned a letter with 16 of their colleagues advocating a two-tiered regulatory approach whereby the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission would monitor the rule on a day-to-day basis while banking regulators performed deeper and longer reviews.

    Banking lobbyists are hoping to soften the impact of the Volcker rule by influencing the implementation process, which Republicans also will seek to accomplish through congressional committee oversight, according to policy analysts.

    In Tuesday's midterm U.S. elections, Republicans won a majority of the seats in the House, putting Bachus on track to take over the Financial Services Committee next year. It is currently chaired by Democrat Barney Frank.

    "It is truly astounding that less than a day after winning control of the people's House of Representatives, Republican leaders are already hard at work doing the business of big Wall Street banks," said Tom McMahon, executive director of Americans United for Change, a progressive lobbying group.
  2. huh


    I don't understand why everybody seems to be fine with banks using tax payer insured dollars to gamble while they reap all the rewards and none of the risk. At the very least keep taxpayer dollars out of the commodity market where prices actually matter.
  3. This is the way one Wall St insider spins it, avoiding mentioning the Volcker rule altogether and avoid mentioning that it was due to lack of proper banking regulation that caused the financial meltdown in the first place. This is call shifting the blame :
  4. pspr


    I think it started from the govment pushing for loans to unqualified home buyers. The banks just went along with the govment. When the housing bubble crashed, the whole deck of cards built by the govment came tumbling down.
  5. Huh? Exactly. More like WTF? Re-instate Glass Stegal at minimum. No bank should be able to co mingle funds and cry to Congress when the blow up and lose our money.
  6. Bait and switch.
    Those dupes who marched for the Tea Party are about to find out who was paying for all that publicity they got.
  7. Albert


    You do realize that there are banks that acted as adults and lent responsibly while those around them ran amuck? So you hate the government for making them forget first principles in safe lending practices? Hmmm. There was plenty of money around after those reckless bastards failed and continue to fail to act responsibly and those who had been diligent and thrifty would have picked up the pieces and we would now be off on better course instead of reloading the gangster bankers for more mayhem which, as sure as night follows day, is sure to come.
  8. Of course there were deadbeats who were going to ask for loans without ever thinking of paying it back. That's what deadbeats DO!

    If you were in charge of loans and some deadbeat came to you for money, would you give it to them?

    Also, I'm not sure if firms like Countrywide and New Century were required by government mandate to give NINJA loans. Is there any documentation that gov't law made them do that?
  9. The government did not push banks to give loans to unqualified people! How dumb do ya have to be to believe this crap? This is blaming the CRA which had nothing to do with the housing bubble. One of many examples:Rich Default Far More Than the Rest of Us Orange County CA was ground zero of the housing bubble, anything think the govt pushed loans to those people?? This is an idiot republican talking point.
  10. There have been arguments made that CRA made it more difficult for banks to do business unless they fulfilled CRA requirements - basically that it was a thorn in the side of banks.

    But even if that is true - so what?

    Because the answer in the end seems to be "so that made it ok or necessary to accept or commit fraud to fulfill the requirements." It's not stated that way or in those words, but that is the conclusion of that line of reasoning.

    Liars loans are fraud. Altering loan documentation to make someone appear credit-worthy for a loan is fraud.

    Just because a bank is unhappy with a gov't mandate, it doesn't mean it then becomes ok to turn a blind eye to fraud in lending practices.

    In effect, the argument seems to be "CRA made the banks accept and/or commit fraud."


    Why didn't they just use their formidable lobbying efforts to change what they didn't like?
    #10     Nov 6, 2010