“The result will be the worst of all worlds,” he adds.
Further, as independent financial reporter David Dayen writes in the New Republic, by allowing big banks to engage in “market-making,” the Volcker rule opens to the door to “back-door proprietary trading”:
Further, the rule may also give banks discretion to decide for themselves whether their trades are permissible.
According to the joint press release, compliance with the rule is determined by the size of the operation. Those with “significant trading operations” must establish a compliance program where bank CEOs will be required to “attest that the program is reasonably designed to achieve compliance with the final rule.”
Citing a similar certification that could have been used during the financial crisis to send non-compliant CEOs to jail, Dayen writes: “Given that history, and the fact that the certification here is even weaker, it’s hard to see it as much more than lip service.”
“Whoever is the primary supervisor has enormous discretion about how this [rule] will affect trading,” Marcus Stanley, the policy director at Americans for Financial reform, told Mother Jones. He added that the final Volcker rule “does not include transparency provisions that would allow the public to judge whether banks are complying.”
With Reuters reporting that Wall Street banks are already preparing to wage a legal battle against the new rule, observers note that any analysis—whether celebratory or critical—is premature.
As Dayen writes:
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