How often does this have to happen?
by David Atkins
Via TPM:
On a Friday conference call with reporters, Sens. Carl Levin (D-MI) and Jeff Merkley (D-OR) criticized regulators for writing a major loophole into the so-called Volcker Rule — meant to prevent banks from betting with depositor funds — at the behest of financial interests.
“It is inconsistent to create this kind of a major loophole,” Levin said, noting that it goes against the intent of the reforms Congress passed.
The law was designed to restrict banks from gambling with customer funds under the guise of “hedging,” while still allowing banks to make proprietary trades as hedges against specific investments. But it tasked Obama administration regulators with writing the restrictions, and as drafted those regulations would allow banks to hedge against broad losses by placing bets, such as JP Morgan’s, on things like economic growth and inflation.
This exception, Merkley noted, will allow banks to hide a “vast amount of proprietary trading.”
“The draft rules at this point are way too lax,” Merkley added. “They do not have the bright lines that are needed.
This came as no surprise to either senator, both of whom identified this and similar loopholes in early versions of the rule months ago.
“Banks could easily use portfolio-based hedging to mask proprietary trading,” they wrote in a February letter to regulators.
This is exactly what happened at JP Morgan — and is likely the reason why the company’s CEO Jamie Dimon claimed that the losing bets wouldn’t have run afoul of the Volcker Rule if it had been operational. The rule is intended to take effect in July, though Wall Street execs, including Dimon, have been pushing hard to delay implementation.
It’s exhausting being a progressive. It’s like being a permanent Cassandra: right about almost everything (within the confines of social democracy on a capitalist substrate), all the time, but disrespected in one’s own time and consistently marginalized. And it’s not just bloggers. It’s Nobel Prize winners, too.
And yet nothing ever changes. Every new argument is determined as if both sides were on equally respectable footing. At some point, doesn’t one side have to get credit for consistently being right?
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