Volcker: Make Banks Less Risky
From the WSJ (Hat tip to The Big Picture). Paul Volcker with a novel concept:
The activities Mr. Volcker criticized have caused banks to incur major losses in recent years. Nonetheless, proprietary trading and related activities appear to be making a comeback as markets have thawed.
Mr. Volcker said banks should be banned from “sponsoring and capitalizing” hedge funds and private-equity firms, which are largely unregulated. He also said “particularly strict supervision, with strong capital and collateral requirements, should be directed toward limiting proprietary securities and derivatives trading.”
He also said collateral and leverage restrictions against the largest nonbank financial institutions “may be needed.”
The comments reflect Mr. Volcker’s long-held view that banks should act more in line with their traditional role and not take extremely risky gambles, which could threaten the viability of commercial banks and expose the Federal Reserve and taxpayers to large risks. Asked after his speech if his comments represent a break with the White House’s proposal, he replied: “Nothing I said today should be a surprise” to the administration.
Read the full article here
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