Wall Street unhappy with risky trade curbing Volcker rule
- 10 years ago
There is some unhappiness on Wall Street after US financial regulators approved a ban on banks there making risky investments with their own money – so called proprietary trades.
It is intended to prevent the kind of speculative investment bets that were blamed for the 2008 financial crisis.
The rule – named after former Federal Reserve chairman Paul Volcker who’s idea it was – was passed by the Fed and other regulators despite banks saying it would hit their earnings.
The American Bankers Association called it an “enormous, highly complex and burdensome rule” and banking groups may challenge it in the courts.
Lawyer Mark Rifkin, a partner with Wolf Haldenstein Adler Freeman & Herz , who specialises in this area, believes the banks will now look for workarounds: “Eventually Wall Street will figure out where the loopholes are in the ‘Volcker Rule’ and will exploit those loopholes the same way Wall Street exploited the removal of the prohibition on proprietary trading when the wall between commercial banks and investments banks was broken.”
It has taken more than two years to craft the complex reform, but experts said it was not clear if it would have prevented incidents like last year’s six billion dollar loss by JPMorgan in trading of a financial instrument known as derivatives.
It is intended to prevent the kind of speculative investment bets that were blamed for the 2008 financial crisis.
The rule – named after former Federal Reserve chairman Paul Volcker who’s idea it was – was passed by the Fed and other regulators despite banks saying it would hit their earnings.
The American Bankers Association called it an “enormous, highly complex and burdensome rule” and banking groups may challenge it in the courts.
Lawyer Mark Rifkin, a partner with Wolf Haldenstein Adler Freeman & Herz , who specialises in this area, believes the banks will now look for workarounds: “Eventually Wall Street will figure out where the loopholes are in the ‘Volcker Rule’ and will exploit those loopholes the same way Wall Street exploited the removal of the prohibition on proprietary trading when the wall between commercial banks and investments banks was broken.”
It has taken more than two years to craft the complex reform, but experts said it was not clear if it would have prevented incidents like last year’s six billion dollar loss by JPMorgan in trading of a financial instrument known as derivatives.