New Rules – New Game?

Barataria explains the new implementation of the Volcker Rule, which prohibits federally insured banks from (some kinds of?) risky investments. It fulfills the same function as the Glass-Steagall Act, a Depression-era law that was nixed by Congress in 1999.

Barataria - The work of Erik Hare

Tuesday is scheduled to be the day that everything changes. Not everything, really, but it’s the day that the “Volcker Rule” will finally go into effect. “Leave the capital markets to their own devices without any expectation of government protection and keep the existing safety net for the commercial banking system,” Volcker said in 2009. In practice, this means that commercial banking, with deposits backed by the FDIC, have to be separated from stock trading and similar activities.

It’s not the Glass-Steagall Act, which required completely separate kinds of banks operating as different companies to perform the different kinds of investing. But it’s not bad. And if it sounds simple in principle the regulation authorized by Dodd-Frank takes 800 pages. Four years from its proposal and 3 years from its passage, it’s ready to roll out. How will it go?

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