It’s July, which means that the Volcker Rule should be going into effect. Proposed by former FEDERAL RESERVE CHAIRMAIN, Paul Volcker, the Volcker rule is an addendum to the DODD-FRANK WALL ST REFORM AND CONSUMER PROTECTION ACT aimed to regulate how big banks use money their customers have invested. Endorsed by Obama in January 2010, the ban on proprietary trading, would prevent banks from using deposits to trade on their own accounts. This is not how it’s been happening, and Volcker sites that such speculative activity played a key role in the financial crisis of 2007-2010. As it applies to the Libor scandal, we are seeing new evidence surface in the form of emails from traders asking banks to LOWER their lending rates, not raise them. According to CNN MONEY, this is pandemic, and speaks to the rotten core of our Wall Street woes. Too much emphasis might be placed on the profits banks turn from trading, rather than from lending. It’s a matter of what it means to be the best bank out there: is it the most profitable bank? or the institution that works hardest for their consumer base? While both are optimal for a top financial firm, we haven’t been seeing much balance in their behavior. Hopefully, when July 21 rolls around, balance will start to be maintained. But there are already dozens of exceptions to this new regulation, and once it is imposed, even more will surface. It’s not the end of market manipulation, but its a step in the right direction.
