The challenge for the Fed is to hold rates low without inflating bubbles. The way to do so is to control speculation through stepped-up regulation of banks and other financial institutions. Instead, the Fed has been inclined to ease up on regulation.On Dec. 19, it delayed a core provision of the Volcker Rule, a part of the 2010 Dodd-Frank financial reform law that bans speculative trading by federally backed banks. Under the rule, banks were supposed to sell their investments in private equity funds and hedge funds by July 2015. They will now have until mid-2017, and possibly until 2022, to do so. The rationale for the delay is that closing out their bets sooner might force them to take potentially destabilizing losses. It is simply not credible that banks need seven to 12 years to unwind their bets. The delay is yet another example of regulators who are captive to the banks they are supposed to oversee.Earlier this year, the Fed delayed another provision of Dodd-Frank — one that requires a bank to be downsized if it does not have a plausible plan for dismantling itself in the event of impending failure. When 11 large banks failed in August to submit such plans to bank regulators, the Fed gave them another year to keep working at it, allowing them to keep taking outsize risks with taxpayer backing.
Blogs I Follow
- Pamela Roberts et Ezechiel Lopemba de SIL en visite à FAVL-BF
- Someday you might like this song by Jason Molina, Farewell Transmission, but don’t go down his dark path no no
- Why did the South support the Federal income tax and the 16th amendment? because they understood the Progressive movement all too well
- Who I Am & Why I Am Where I Am by Kaitlyn Aurelia Smith
- Kathryn Schulz in The New Yorker, on WIlliam Kelley, a fantastic short essay
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