We've talked a lot about the so-called Volcker Rule. I've called it a "cop-out" and "joke" and tracked its bloated path from 300 pages to nearly 1,000.
Well, now it's here.
On Tuesday the rule was signed off on by the five regulatory bodies that will have to enforce it when it goes into effect in July 2015 (supposedly). And getting it done and approved was no small feat.
The Volcker Rule comes down to this: It stops banks and any other financial institutions that are backstopped by the U.S. Federal Reserve or the Federal Deposit Insurance Corporation (FDIC), generally speaking, taxpayers, from betting on their own behalf (proprietary or "prop" trading).
Don't get me wrong. I'm thrilled that the Volcker Rule passed. And I'll be thrilled when it goes into effect.
But everything is not as it seems.
Let me show you…
The Volcker Rule: Two Major Flaws
First, what's not thrilling is that the five regulatory horsemen (make that pack mules), who have their own agendas and their own masters, who are supposed to enforce the Volcker Rule, will all have to use their own judgment and interpretation of the rule succinctly laid out in almost a thousand pages.
Second, what else is not thrilling is that this ain't over 'til it's over. July 2015 is a line in the sand. The Fed can forward that to July 2016, or July 2017, if they want.
Whenever the start date is, it won't be before what's already started – the legal challenges and backdoor dilution efforts by some of our better-paid legislators in Congress, and the big banks and their lobbyists, have slashed and burned what's now on the table.
Here's the deal, really. There's no reason banks should have broker-dealer businesses. There's no cause for banks to be market-makers. The only hedging banks should be allowed to do is to hedge their loan portfolios and the government and municipal bonds they are allowed to invest in. Trading? Why should taxpayer-backed big banks even be in the trading business?
If they weren't, don't you think there'd be a lot more lending going on?
Now it's incumbent upon me, more often than not "The Indictor," to give a shout-out to an American hero who was instrumental in bringing the Volcker Rule front and center:
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.