Yup, another Christmas Gift for Wall Street.
Yesterday afternoon, the Federal Reserve gave banks an extra year to comply with a key provision of the Volcker Rule. By doing so, the Federal Reserve is giving financial lobbyists more time to kill the new regulation before it goes into effect.
The Volcker Rule is a key element of the 2010 Dodd-Frank financial reform law that bans banks from engaging in proprietary trading -- speculative deals that are designed only to benefit the bank itself, rather than its clients. Thursday's move by the Fed gives banks an additional year to unwind investments in private equity firms, hedge funds and specialty securities projects. The central bank also said it plans to extend the deadline by another 12 months next year, which would give Wall Street a two-year reprieve through the 2016 presidential election.
The Federal Reserves delay comes a week after both Houses of Congress granted Wall Street a reprieve from another reform that had been mandated by the 2010 Dodd-Frank financial reform law. The measure, known as the swaps push-out rule had eliminated federal subsidies for trading in risky derivatives -- the complex contracts at the heart of the 2008 banking meltdown. Bank watchdogs say the Volcker Rule delay adds insult to injury.
Big banks including Goldman Sachs and Morgan Stanley have billions of dollars invested in private equity firms that they would have to sell at a loss based on current prices, according to a Bloomberg report from early December. Dodd-Frank gave banks four years to unwind their investments in speculative enterprises, setting a deadline of July 21, 2014. The Fed had previously extended that deadline by one year, and now plans to push it out to July 2017.
"The Street has had years of notice to unwind these investments, and it appears that their self-serving complaints have been accepted fairly uncritically without a real analysis for the basis of the claim," said Dennis Kelleher, president and CEO of Better Markets, a financial reform advocacy group. "If you can't get out of a trade in seven years, it's probably not the kind of trade you should be doing."
Needles to say, some Progressive Democrats were outraged by the decision, although Elizabeth Warren has remained silent in the issue, which seems to have attracted less press attention over the issue.
"The Wall Street Casino is alive and well," said Sen. Jeff Merkley (D-Ore.), who co-authored the Volcker Rule statute with Sen. Carl Levin (D-Mich.). "Last week it was Congress granting the big banks the right to keep trading on banned risky derivatives with government backing. Today it is the Fed granting big banks two more years to make big bets through direct ownership of private equity and hedge funds. It all amounts to the same thing – spineless accommodation of the big banks’ desire to run taxpayer-subsidized hedge funds. This is wrong for taxpayers and it is wrong for the stability of our banking system. We expect more of the Federal Reserve."
Dodd-Frank is being gutted like a pig at a slaughter house. And at some point in the next couple of years, it is going to be useless as a tool to regulate Wall Street.
http://www.huffingtonpost.com/...