Looks like the pendulum is swinging Mr. Volcker’s way…
This would be huge if he passes it.
A few things spring to mind -
- There could be some serious bad side-effects to this (for the economy)
- Banks can still cream off profits from their customers by selling the order flow to hedge funds through charging the hedge funds big commission to trade with them.
- I can see this law being rescinded in another 20 years when the next bubble is in full flow and the banks ask lobby politicians to remove it.
I am impressed by Mr. O. I wonder how much of this is related to the loss of the Kennedy seat? The American public are angry.
Will Goldmans start to offer mortgages?
It will indeed be impressive if it happens. And I think you are right, but it is not just the public that are angry. The Democrats internally are angry, I’d say, and are looking askance at their new banking chums.
I suspect Goldmans will be pulling out all the stops to revert back to being an investment bank from being a bank holding company… not sure how easy it is to go the other way, but I can’t imagine their banking activities are that large? The big effects will be on Barclays, JP Morgan, Morgan Stanley, Citi…
“clot” & CNBC & “accident”
I cannot think of a single developed economy that would want to host these activities now.
Of course the banks will find loopholes and of course prop. trading will continue in a fashion. But this appears like a concerted effort to tame the financial system in the US.
Would the status of the company matter? Even if Goldmans reinvents itself as an investment bank then it should theoretically loose the backing of the US governement and treasury. Think what this will do to its cost of capital.
The statement talks about limiting growth in liabilities too so I suspect that there will be strict new rules on capital too.
I am struggling to find anything to disagee with here.
Am I right in my understanding that its basicially just a re-introduction of the Glass–Steagall Act ?
Do you have a link to the statement? All I can see is second-hand.
Goldman have shown the ability to run like a publicly traded hedge fund. I think the lure of free money was too much for them (as opposed to raising capital). I don’t expect that will disappear. The others will have to spin off their investment banks, I suppose. Be a bit of a pisser for Barclays to have to spin off BarCap at the same time as everyone else is offloading investment banks…
If it includes any reference to Basle III, then it goes a lot further. If it says anything at all about derivatives even…
But the devil will be in the detail…
Hmmm, the squid escapes…
ftalphaville.ft.com/blog/2010/01 … prop-desk/
Be honest, are you surprised ?
A cynic might say that GS are cheering on Obama, or that they gave him the idea, the competition gets it in the nads again.
By the way, they better not introduce these rules in Ireland, who would buy all the govt bonds?
Where will this lead - and how will it affect us? I love the but about being “held hostage”
sounds so familiar.
Nah, never happen… that government bonds would be included as ‘trading’. They are, after all, considered cash.