Banks Want Another Account to Disguise Their Risky Trades

[phantom power]

Banks are urging U.S. authorities to broaden a little-noticed exemption in the Volcker rule’s trading curb that critics say could blind regulators to the next version of the JPMorgan Chase & Co Whale trade [...]

The exemption covers a special type of account, designed to prevent the kind of cash crunches that took down Bear Stearns and Lehman Brothers in the heat of the 2007-2009 financial crisis.

Banks want an even broader exemption. But critics say the proposed rule, as is, already excludes liquidity trades almost entirely from the Volcker rule, expected to be finalized later this year.

As is, the liquidity exemption “deeply undermines the applicability of the Volcker firewall,” Democratic Senator Jeff Merkley, one of the authors of the Dodd-Frank provision authorizing the rule, said in an interview.

...

The banks basically want to find an account that they can use for the purposes of casino playing, and will make up any excuse – hedging! market-making! liquidity management! – to get that account legalized. Considering that the regulators continue to back off actually writing the rules here, it’s likely the banks will be successful.

http://news.firedoglake.com/2012/08/29/banks-want-another-account-to-disguise-their-risky-trades/

[Mnemosyne]

1. Always a loophole for dishonest 'men'. Honorable men don't need them. nt