Reckless Banks Resist Reform

By: Matthew Arndt, CFA, CPA, CFP | January 22, 2010 | The Politicians, The Regulators

There is a developing proposal that requires congressional approval which is intended to limit among other things speculative trading activity at large banks that receive blanket guarantees from U.S. taxpayers through FDIC insurance and other Governmental assurances. Branded the Volcker Rule after its originator former Federal Reserve chairman Paul Volcker, it imposes tougher standards on the financial industry and risk-taking at depository institutions. This is the most sensible development in regulating risky activity at large commercial banks that received taxpayer bailouts in 2008 and 2009 that we have witnessed up to this point. And wouldn’t you know it, the banking industry opposes it. Go figure?

I would be the first to say that government should limit its involvement in private matters because I think government with its massive bureaucracies tends to be too self-serving. But in light of what has happened we need some sensible regulation. Especially since we saw large financial institutions who received access to cheap capital provided by U.S. taxpayers use that money, instead of lending it for economic expansion, to engage in the same old risky business as before allowing them to pocket record profits at the expense of U.S. citizens. The large commercial banks obviously don’t get it.

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