Just going through the details of the Senate and House’s merged Financial Reform Bill, also known as the Let’s Not Allow Our Largest Donors To Embarrass Us Again Act of 2010.
Wall Street wins this round. The “teeth” of the Volcker Rule have been kicked in and there are enough holes elsewhere for White & Case to exploit on behalf of their clientele til the cows come home. The Dems unanimously voted for it. Interestingly, Republicans all voted against it. They didn’t think the final version was strict enough or that it did enough to prevent Too Big To Fail.
Reading through the bill, I have to say, is a bit like watching Pulp Fiction or Goodfellas on TNT. The plot is intact but the movie is still somehow rendered meaningless minus the blood, guts and f-bombs. No, Ray Liotta didn’t just say ‘Fudge You’ and no, banks should not be taking deposits with one hand and rolling the dice with the other.
There will be some limitation to what large banks can do on a proprietary basis, but they will still be de facto giant hedge funds, albeit hedge funds with higher capital reserve requirements.
The ratings agency stuff in the bill was well done in my view – it adds liability into the mix, finally.
Tyler Durden is even, how shall we put this, less enthusiastic than I am:
Congrats, middle class, once again you get raped by Wall Street, which is off to the race to yet again rapidly blow itself up courtesy of 30x leverage, unlimited discount window usage, trillions in excess reserves, quadrillions in unregulated derivatives, a TBTF framework that has been untouched and will need a rescue in under a year, non-existent accounting rules, a culture of unmitigated greed, and all of Congress and Senate on its payroll. And, sorry, you can’t even vote some of the idiots that passed this garbage out: after all there is a retiring lame duck in charge of it all.
Below are some links to catch you up on what’s actually passed. Don’t get too excited, the next crisis is all but assured regardless.