In Europe, Volcker Makes Case For Bank Trading Limits

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Source: Reuters

Commercial banks will come to resemble hedge funds over time unless new rules are introduced setting limits on proprietary trading, White House economic adviser Paul Volcker said on Saturday.

In a speech at the Bellevue presidential palace in Berlin, Volcker made the case for proposals being pushed by the administration of President Barack Obama that would lead to a clamp down on risky bank activities.

The proposals have been dubbed the "Volcker rule" after the former Federal Reserve chairman.

"Without any limitation on proprietary activity by commercial banks, they will, indeed, over time come to take on the characteristics of hedge funds," Volcker said in the text of a speech provided to Reuters before delivery.

Read more: http://www.nytimes.com/reuters/2010/03/06/business/business-us-financial-volcker.html?_r=1

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1. Sad to say his wisdom will find a better reception there than here. Nt

[BeatleBoot]

2. Do you know how many meetings that I've been to where

the youngsters tell me about "Greenspan" and what a great guy he was and I shut them up

and tell them that we owe more to Paul Volcker and President Carter.

[Alias Dictus Tyrant]

3. A regulatory monoculture enabled the problem in the first place.

One of the reasons the Fannie/Freddie fraud spread to so many countries is that banking regulatory treaties require many countries to all do things exactly the same way even if the facts on the ground violate common sense. Consequently, if a loophole or exploit is found in the banking system of one country, it can spread across most of the world's banking system. That is what happened here. Apparently they want to do more of the same.

Regulatory monocultures are bad in banking for the same reason monocultures are bad everywhere else. Diversity is a firewall against stupidity, maliciousness, and bad luck. Let every country manage their own banks as they see fit. That way, when one country screws the pooch the rest of the world does not have to go over the cliff like a bunch of lemmings due to regulatory obligations.

Let's have a little evolution in the banking system.

[AllentownJake]

4. I feel bad for Paul

He's the only voice of reason in the wilderness right now in the administration. I can't imagine what it is like to have to actually try to talk sense into Larry Summers.

I expect as this Greece crisis continues as well as what is being learned in Italy, some American banks are going to be facing some very seriously pissed off regulators looking for any excuse to kick their ass out of the continent to give their people someone to be mad at, that isn't them.

[Rapier09]

5. Can he like make a case against Goldman?

Because whatever case they make in court isn't going to stop them from doing some horribly counterproductive things to the economy.