“We are in a much more fragile situation than we should be because the regulators haven’t been on the job,” said Marcus Stanley, policy director for Americans for Financial Reform. “This is a real economic crisis we’re facing.”
In August regulators issued a rule that dramatically weakened the Volcker Rule limits on direct proprietary trading by banks. Today, they have proposed new changes that would greatly weaken restrictions on banks taking risks through ownership of external funds, including venture capital funds and securitization vehicles like collateralized debt obligations.
Today’s financial stability report from the Federal Reserve clearly documents that we are at or near the peak of an economic cycle, with inflated asset prices and strong lending growth leading to signs of excessive leverage in the corporate sector. The peak of the cycle is the time to strengthen financial safeguards, not weaken them.
“‘When lawmakers vote for banking deregulation even though banks are raking in record profits, it exposes what is really at work,’ said Lisa Donner, executive director of Americans for Financial Reform. ‘The bank lobby has flooded the political system with money, and is getting a return on its
investment. The result is legislation that makes the financial system less safe and less fair, and puts consumers at greater risk of abuse.’”
“‘The proposal ‘is an attempt to unravel fundamental elements of the response to the 2008 financial crisis, when banks financed their gambling with taxpayer-insured deposits,’ Marcus Stanley, policy director at Americans for Financial Reform, said in a statement. ‘If implemented, these proposals could turn the Volcker Rule into a dead letter.'”
“’What is critical is that simplification not undermine the core principle at stake — that taxpayer-supported banking groups, of any size, not participate in proprietary trading at odds with the basic public and customers’ interests,’ Paul Volcker said in a statement…
‘This proposal is no minor set of technical tweaks to the Volcker Rule, but an attempt to unravel fundamental elements of the response to the 2008 financial crisis, when banks financed their gambling with taxpayer-insured deposits,’ said Marcus Stanley, policy director at Americans for Financial Reform.”
This proposal is no minor set of technical tweaks to the Volcker Rule, but an attempt to unravel fundamental elements of the response to the 2008 financial crisis, when banks financed their gambling with taxpayer-insured deposits. If implemented, these proposals could turn the Volcker Rule into a dead letter, a regulation that would not meaningfully restrict trading activities.
View or download a PDF version of the letter here. April 12, 2018 Dear Representative: On behalf of Americans for Financial Reform, we are writing to urge you to vote against HR 4790, which is being considered on the House floor this week. This bill
“No other piece of Dodd-Frank “mattered to Goldman quite like the Volcker Rule, which would protect banks’ solvency by limiting their freedom to make speculative trades with their own money. Unless Goldman could initiate what [AFR Policy Director Marcus] Stanley called the ‘complexity two-step’ — win a carve-out so a new rule wouldn’t interfere with legitimate business and then use that carve-out to render a rule toothless — Volcker would slam the door shut on the entire direction in which Blankfein and Cohn had taken Goldman.”