Why would the US government/ Fed offer a safety net for any trading activites whether they be proprietary or not? If there's one thing the financial crisis taught us is that the Fed can print themselves out of any credi crunch. Let 'em trade, but not without A) strict cash reserves and B) strict margin calls. The problem arises when mark to market valuated derivitives are then leveraged into other trades.
He is a senile old fool. He doesn't even understand the questions today. Obama is an idiot for consulting him and hiring Geither, Holder etc.
In other words, "The Fed can print enough money to mop up bank mistakes of any size and transfer their losses to the tax payer".
Volcker has probably forgotten more than Bernanke and Geithner combined will ever learn. Only negative is his age.
Because old fashion banks may still need to lay off risk. They won't be trading just for gain and shouldn't be piled in the same group.
I don't understand why their is such resistance from the repubs to stopping banks from using deposits from trading. If banks take the tax payer deposit and go play around in the commodity market which will probably result in higher commodity prices..... So now the banks take my deposit money, give me .25% interest, go plow into the oil market thus driving the price of my gas. They make a profit and pay themselves bonuses or they fuck up and get bailed out by the tax payer. How is this capitalism? Either stop banks from using tax payer backed money to trade or get rid of the FDIC insurance so that the banks have to actually be responsible with their deposits.
Regulation is never the answer. It will never "fix" a broken economy. The solution is easy. Let free markets WORK. End Moral Hazard. End bailouts, let banks go under, watch homeowners go belly up. That's where it ends. We get a hard recession for 12 months, financial giants go under, followed by robust, sustainable growth absent the reckless speculation and manias that's characterized the entire decade. What bank will gamble with crap underwriting and derivative premium after JPM and Citi get liquidated? What shareholder or depositor would let them? Of course, Congress would lose their biggest lobbyist (Wallstreet) and unemployment would go north of 15%, for a year. But Obama's got three years left. I say lance the festering wound. Let blood flow in the streets ! Obama could look like a hero come reelection if America is forced to take its medicine NOW ! But that won't happen. The President just passed a 3.8 Trillion Dollar budget ! America is beyond saving, I'm afraid.
This. And end Moral Hazard. No more Taxpayer bailouts. No more FDIC depositor insurance. Problem solved. The crap gets flushed, then on to new growth, with sound banking and risk taking !
Get ready for some bank runs then. Hope you have plenty of cash squirreled away to get you through. Oh I almost forgot, they can just print more.
Fine with me. There's tonnes of smaller US banks that didn't gamble recklessly on subprime, or other.