They are going to vote on it this week. A well researched and funny explanation of what is going on: Also: https://www.wsj.com/articles/expected-volcker-rule-update-a-win-for-large-banks-11565982226
Prop trading was a red herring. The specific risk taking issues that caused the financial crisis were specifically carved out of the volcker rule (mortgage back securities inventories). Further pretty much all bank desks had record profits in 2008. Except the mortgage desks which lost like 5x the other desk combined pnls. Banks were quick to comply with the volcker rule because they would give up a few hundred million of profit (much of which they could hide inside customer books) and appear to appease the public.
Weren't many of them on their way to at least paring back prop trading anyway because of the variance of the returns? Not sure if that's accurate or not, I've heard it a number of times but never dug deep enough to establish the veracity of it.
prop desks were everywhere. Bank execs wanted customer based revenues but the group heads would use prop returns to boost their revenues. Our division had 5 prop desks within the North American customer platform by itself (and that didn’t include the two explicit prop groups in the division). There were of course other prop desks in Europe, Asia, Latin America, India, Russia and Mid East. Plus I think every bank had Goldman envy; they had figured out how prop didn’t add volatility to the earnings.
So basically that idea that they were on their way isn't accurate? If that's the case, do you think they'll all spin them back up now?
I like that guy's writing style. Right up my alley. Is his bit true though, about Buffet buying up financial stocks recently? I need to rebalance my portfolio, and maybe the financial ETFs are the way to go. Hmmmm.
I do not believe it’s accurate that they were on their way out. in fact it was highly controversial that banks started competing with Private Equity firms for deals! I don’t think they ever shut down the embedded desks. The banks shut down the explicit prop groups as a compromise to avoid further regulation (like on atm fees). Those will probably come back in time. Outside of GSPS I doubt any defined a company’s quarterly pnl (London whale being the exception).
Do you think the PE side will come back? I have always been a little jealous at how GS and McKinsey and the other top tier i-bank and consulting firms can get away with pretty blatant potential conflicts of interest with their clients when the rest of us have to go to great lengths to divest ourselves of any potential conflicts even if they aren't real.
I doubt it. That always seemed egregious to me. What business does Bank One Partners have in buying some random manufacturing firm in Texas? It made sense for JPMorgan to be speculating on interest rates and government credit spreads, but not in financially engineering whole companies. I agree on GS and McKinsey. GS has spinoff companies that are solely owned by the partners there. I was shocked to find out that McKinsey had their own hedgefund - and that that hedgefund was a substantial net worth of many of the partners at that firm.
BUSINESS NEWS AUGUST 20, 2019 / 7:58 AM / UPDATED AN HOUR AGO U.S. regulators hand Wall Street a major win with stripped-down 'Volcker Rule' Pete Schroeder 4 MIN READ WASHINGTON (Reuters) - U.S. banking regulators on Tuesday eased trading regulations for Wall Street banks, giving them one of their biggest wins under the Trump administration but drawing criticism from consumer activists who warned of potential risks to taxpayers. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) approved the revamped version of the so-called “Volcker Rule,” which aims to ban lenders that accept U.S. taxpayer-insured deposits from engaging in proprietary trading. The changes, first proposed in May 2018, followed years of lobbying by banks, including Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and Morgan Stanley (MS.N), which have long complained the rule is too vague and complex. The new rule gives banks more leeway in terms of trading activity and simplifies how banks can tell if that trading is permitted by law. While many regulatory experts have agreed the prior rule was too cumbersome, the changes were criticized by consumer groups and Democratic lawmakers who say a rewrite could put taxpayers at risk. FDIC Commissioner Martin Gruenberg, a Democrat who backed the Volcker rewrite proposed in May 2018, voted against the final rule Tuesday, saying it would “effectively undo” the rule’s protections. In particular, he warned that the new rule narrows the definition of banned trading in a way that could free up banks to engage in riskier bets with potentially billions of dollars in financial instruments. The other three FDIC board members, all Republicans, voted in favor. Democratic Representative Maxine Waters, who chairs the House Financial Services Committee, accused regulators of undercutting a cornerstone of Wall Street reforms introduced by the 2010 Dodd-Frank law. “The final rule published today would curtail prohibitions in a manner that Congress never intended,” she said in a statement calling on other regulators to halt the project. Analysts say the final rule, which is significantly different from the proposed 2018 version, could also be vulnerable to legal challenges. The rewrite aims to clarify which trades are exempt from the ban, such as when banks facilitate client trades and hedge risks, and to expand those exemptions. The final rewrite scraps a proposed new test for identifying proprietary trading that banks complained would have made the rule even more complicated. That proposed “accounting test” was meant to replace a more subjective test that aimed to identify if a trader intended a trade to be speculative. But banks argued it could apply to a host of additional financial instruments not meant to be covered by the rule. The final rule scraps that proposal for large Wall Street firms, instead simplifying the original test and only applying it to much smaller banks. At the same time, the rewrite simplifies a separate part of the rule which makes it easier for banks to invest in hedge funds or private equity funds. Regulators said they expect to propose further easing of the “covered funds” aspect of the rule, including for foreign firms, later this year. The banking industry hailed the rule, while calling for regulators to expedite that additional relief. The rule will become effective on Jan. 1, 2020, but banks will have one year to comply. The OCC and the FDIC are two of five regulators charged with implementing the rule. The others - the Federal Reserve, the Securities and Exchange Commission, and the Commodities Futures Trading Commission - are expected to approve the new rule soon.