7/26, "Obama signs a bill that lets banks have US over a barrel once more," Telegraph UK, by Liam Halligan
- "The so-called "Volcker Rule" is the centrepiece of Dodd-Frank and as such, is indicative of the entire package. It's designed to restrict the ability of universal banks to speculate with taxpayer-backed money,
- rather than making sure by keeping deposit takers and investment banks separate.
Volcker places limits on so-called "prop" trading without defining what it is, so allowing banks to exploit what they claim is
- "the grey area between market-making and speculation".
Wall Street firms will also still be able to lever up punters' money and deal in credit-default swaps – the main culprits in the AIG bankruptcy, which cost US taxpayers $182bn and counting – while also destroying Bear Stearns and Lehman. The only stipulation is that ratings agencies should classify such derivates as "investment grade".
- Such agencies are unreformed and were at the heart of the last debacle
- – so that's hardly reassuring.
Last-minute changes mean that banks can, anyway, use 3pc of their tier-one capital for out-and-out speculation, circumventing Volcker.
- That doesn't sound much, but once levered up 50-times – and such a figure isn't unusual – this huge loophole in Volcker is more than enough to allow investment banks to keep destroying themselves
- in full knowledge the state will pay.
Adding insult to injury, Wall Street then secured delays to the introduction of Volcker – or what's left of it – that in some cases will last for more than 10 years.
The closer you look at Dodd-Frank, the more apparent becomes Wall Street's influence.
- Limits on leverage – rejected.
- Limits on bank size – rejected.
Restrictions on derivatives – well, some trading will go through a central exchange, allowing more scrutiny, but it's entirely unclear how much.
- At every turn, this bill avoids decisions,
- delegating them instead to an army of regulators
who will turn generalities into actual rules. If the banks were able to skew Dodd-Frank their way , think of the influence they'll have when the details are hammered out behind closed doors.
- Obama put the spotlight on the creation of a consumer protection bureau – an attempt, before November's mid-term elections, to make arcane legislation meaningful to the public. Are there limits on credit card interest, ensnaring adjustable rate mortgages or predatory pay-day loans? Nope.
Some other omissions in the bill are breath-taking. There is no mention of Fannie Mae or Freddie Mac – the government-sponsored mortgage-providers that have already cost $145bn in bail-out cash, rising to almost $400bn by 2019.
- No mention, either, of capital requirements – which means the global banking system must rely, once again, on the ridiculous Basel process for resolving this crucial issue.
Once again, Obama missed a chance to give a lead when it comes to financial reform.
- Based on sound-thinking courageous judgment, the Glass-Steagall legislation was only 17 pages long.
Packed with wheezes and loop-holes, Dodd-Frank runs to 2,319 pages. Enough said."
- via Free Republic
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