Curious how much the various banks who stood to be impacted by or, otherwise, benefit from either a concentration or dilution of the Volcker rule? According to OpenSecrets, which crunched the numbers, here is how much being able to continue prop trading meant to some of the largest US banks and lobby groups:
- American Bankers Association: $6.495 million
- JPMorgan: $4 million
- Wells Fargo: $4.440 million
- Citigroup: $4.240 million
- Independent Community Bankers of America: $3.581 million
- Bank of America: $2 million
Not bad considering the loophole-ridden Volcker Rule will effectively permit "hedge" books (where an army of lawyers paid $1000/hour defines just what a hedge is) to continue piling on billions of dollars in wildly profitable, Fed reserve funded trades.
Regulators approved the Volcker rule yesterday, a central piece of the Dodd-Frank bill that limits the ability of banks to engage in high-risk trading. Their decision comes in spite of heavy lobbying from the rule's main opponents: the banks themselves.
The American Bankers Association, which represents the interests of banks of all sizes, spent nearly $6.5 million on lobbying in the first nine months of 2013, with much of that money going to lobbying on behalf of "Dodd-Frank issues." Wells Fargo and Citigroup each spent just over $4 million, while the Independent Community Bankers of America, another organization that represents banks, spent nearly $3.6 million. All three lobbied on the Dodd-Frank legislation.
Bank of America, meanwhile, spent just under $2 million on the Volcker rule and other issues, while JPMorgan Chase spent more than $4 million and listed "implementation and interpretation of the Volcker Rule" as one of its concerns.
The final rule is seen as a defeat for the commercial banking industry, which has already voiced its unhappiness with the decision.
Congrats on the math, alas completely flawed conclusion: obviously the banks wouldn't spend tens of millions not to achieve their goal, which they have - cover up a Rule which is only superficially named for Paul Volcker (even he admitted he had zero contribution in its drafting), and which was almost certainly penned by the banking lobby, in a way that allows banks to continue their prop trading status quo, only this time with the implicit blessing of the government. And since everyone knows how this movie ends, can we just please fast forward to the bit where one after another bank has to once again be bailed out on the taxpayer dime.
Finally, there are those who will be disgusted at how cheaply US politicians can be bought for. That is, sadly, an accurate observation. Recall from Presenting The Greatest ROI Opportunity Ever:
The dream of virtually anyone who has ever traded even one share of stock has always been to generate above market returns, also known as alpha, preferably in a long-term horizon. Why? Because those who manage to return 30%, 20% even 10% above the S&P over the long run, become, all else equal (expert networks and collocated flow-frontrunning HFT boxes aside), legendary investors in the eyes of the general public, which brings the ancillary benefits of fame and fortune (usually in the form of 2 and 20). This is the ultimate goal of everyone who works on Wall Street. Yet, ironically, what most don't realize, is that these returns, or Returns On Investment (ROI), are absolutely meaningless when put side by side next to something few think about when considering investment returns.
Because it is the ROIs for various forms of lobbying the put the compounded long-term returns of the market to absolute shame. As the following infographic demonstrates, ROIs on various lobbying efforts range from a whopping 5,900% (oil subsidies) to a gargantuan 77,500% (pharmaceuticals).
How are these mingboggling returns possible? Simple - because they appeal to the weakest link: the most corrupt, bribable, and infinitely greedy unit of modern society known as 'the politician'.
Yet who benefits from these tremendous arbitrage opportunities? Not you and I, that is for certain.
No - it is the faceless corporations - the IBM Stellar Sphere, the Microsoft Galaxy, Planet Starbucks - which are truly in the control nexus of modern society, and which, precisely courtesy of these lobbying "efforts", in which modest investments generate fantastic returns allowing the status quo to further entrench itself, take advantage of this biggest weakness of modern "developed" society to make the rich much richer (a/k/a that increasingly thinner sliver of society known as investors), who are the sole beneficiaries of this "Amazing ROI" - the stock market is merely one grand (and lately broken, and very much manipulated) distraction, to give everyone the impression the playing field is level.