Pulling Volcker out of the closet following the Massachusetts debacle was a useful diversion: the whole prop trading ban seemed almost credible. And now that there are no immediate public votes in the future, it is safe to put Volcker back where he belongs, but quietly, lest the morts and general peasantry think that Obama is all bluster and no actions. Alas, if the latest development in the ongoing Wall Street "regulatory" saga, as reported by the FT is any indication, the prop trading plan, as proposed by Volcker, is now dead. This time, the last chance to put the financial system on some stable footing comes courtesy of Dick Shelby, Chris Dodd and Paul Kanjorski.
A proposal by former Federal Reserve Chairman Paul Volcker to limit bank’s proprietary trading will be either be dropped or significantly modified in the Senate, lawmakers and staffers told dealReporter.
Senate Banking Committee ranking member Richard Shelby (R-AL) said he opposes the so-called Volcker rule and the Obama administration’s call to levy a USD 90bn tax on banks. His comments come as House Financial Services Committee Chairman Barney Frank (D-MA) predicted the proposals outlined by President Obama could be law within six months.
Speaking to this news service on Thursday, Shelby said if Democrats push forward with the proposals they risk unravelling much of the bipartisan support already reached regarding the passage of financial regulatory reform in the Senate. Shelby said that the Obama administration risks losing Republican support for the bill if they begin to “politicise” the issue.
In retrospect, this is pretty smart of Obama - the prop ban, which was badly conceived, as its actual implementation would likely result in the spin offs of many of Wall Street's most profitable segments, will be buried, and the blame will be put on the republicans. One wonders just whose special interests Richard Shelby is protecting this time around.
And yet, as always, critical to the killing of Volcker's idea, will be none other than Chris Dodd, who is somehow still in office after announcing he is retiring, having the support of about 5 voters in his district.
A Dodd staffer said the senator is likely to quietly drop or modify many of the recommendations in the Volcker rule to ensure Republican support for regulatory reform.
“Chris is retiring so he wants to end his career with an important regulatory reform bill and he wants to make the bill bipartisan,” the staffer said. “He is not going to risk bipartisan support to make the White House happy.”
The Democratic staffer said there is an ongoing debate among members of the banking committee about whether the Volcker rule would effectively push risk out of regulated markets and thus ultimately create more risk to the financial system.
Dodd told this news service on Thursday that the banking committee will begin mark-up of the financial regulatory bill in the near future and his committee will hold a committee meeting on the Volcker Amendment on Tuesday with Volcker and a follow-up hearing on Thursday.
Lastly it seems that Kanjorski is also set on killing the prop ban:
House Financial Services Subcommittee Chairman Paul Kanjorski told this news service he is only 80% to 85% in agreement with the Volcker rule and that many issues raised by Volcker are already included in his amendment passed by the House.
Warner blamed much of the political storm connected to regulatory reform on bankers. He called Goldman Sachs’s proposal to lend USD 500m to small businesses over a five-year period derisory, and said banks need to come out in front of the issue regarding compensation.
So there you have it: Wall Street, after getting bailed out by America, is now back to telling America what is in its own best interest; if the cost is a few corrupt politicians, so be it: we are certain that the trio above was easily purchased with less than one day of Goldman's record trading days during Q4. In the meantime, we continue cruising along, pretending that anything has changed, except that this time open wealth transfer from taxpayers to investment bankers is not only legal and allowed, it is in fact encouraged.