Courtesy of Pam Martens
Two of Wall Street’s crony regulators announced today that they are going to “simplify” the Volcker Rule’s ban on proprietary trading at Wall Street banks, providing another big win for Wall Street and another big nightmare for Main Street.
The financial crash on Wall Street in 2008 was the deepest economic upheaval in the U.S. since the Great Depression. Millions of honest, hardworking Americans lost their jobs, and then their homes, as a result of the economic collapse. Many of these Americans have yet to fully recover financially after more than a decade has passed.
The promise of the Obama administration was that its Dodd-Frank Wall Street Reform and Consumer Protection Act that was signed into law in 2010 would put an end to the reckless gambling casino on Wall Street that had brought on the collapse.
One of the key reforms of the Act was Section 619, commonly known as the Volcker Rule after former Federal Reserve Chairman, Paul Volcker, who headed President Obama’s Economic Recovery Advisory Board. Volcker correctly believed that the proprietary trading (making bets for the house) of the Wall Street banks dramatically deepened the financial crisis and forced the U.S. taxpayer and the Federal Reserve to bail them out with astronomical sums of money.
The Volcker Rule was meant to serve as a substitute for full restoration of the Glass-Steagall Act of 1933 which made it illegal for banks holding Federally-insured deposits to also speculate in stocks or own stock trading firms. The Glass-Steagall Act kept the U.S. financial system safe for 66 years until its repeal in 1999 under the Wall Street-friendly Clinton administration. It took just nine years after the repeal of the Glass-Steagall Act for Wall Street to blow itself up in a replay of 1929. Going into the crisis of 2008, the biggest speculating investment banks on Wall Street had merged with the largest Federally-insured commercial banks in the U.S. – a clear recipe for disaster which remains as dangerous today as it was in 2008.
Volcker’s assessment of how dangerous the commercial bank/investment bank model had become was borne out by the findings of the Financial Crisis Inquiry Commission’s official report and dozens of other research findings. Just last year the nonprofit, Americans for Financial Reform, assessed the situation like this:
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