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September 20, 2019

Volcker Rule: Trump Administration Re-opening the Wall Street Casino, Endangering Main Street

One reason Wall Street’s too-big-to-fail banks are dangerous and a threat to all American families is because the highest-risk activities have the highest-margins and generate the biggest bonuses. That shift to the high-margin wealth extraction activities is also a shift from the lower-margin wealth creation activities like traditional lending that supports the productive economy, jobs and growth.

However, the high-risk, high-margin activities are almost always socially useless or, indeed, anti-social. Worse, most are unfairly subsidized by taxpayer support for deposits and in numerous other ways. The result is the biggest banks get to compete unfairly and externalize their costs. That’s a classic example of privatizing gains and socializing losses, which is Wall Street’s “heads I win, tails you lose” business model. That is exactly what happened before, during and after the 2008 crash.

That’s why much of financial reform was focused on ending those subsidies, forcing the banks to internalize the costs of those activities, and outright prohibiting the most dangerous, anti-social ones like proprietary trading. Of course, Wall Street hates all that. They want the biggest bonuses as quickly as possible, too often consequences be damned. That’s why they have spent enormous resources for years fighting financial reform relentlessly.

Unfortunately, Wall Street has notched another win from the Trump Administration, which has turned out to be Wall Street’s best friend even though Main Street families are hurt. The most recent win was the gutting of the Volcker Rule, which was supposed to prohibit high risk, dangerous proprietary trading.  Here and here are our press releases explaining the actions; here is a Fact Sheet on the loopholes created by the regulators most recent actions; and here is a document exposing in detail the myths and disinformation of Wall Street.



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