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Our Too-Big-To-Fail banks are at it again...
The Volcker Rule is supposed to ban the banks from making hazardous and speculative trades.
But the big banks are begging for the chance to make the same kind of moves that got us into the 2008 global credit crisis, one of the worst in the modern world.
It's like they never learned their lesson...
They're even enlisting congressional cronies to do their bidding.
One way or another TBTF banks are going to find a way to speculate us all into another crisis...
Here's everything you need to know...
Big Banks Are Trading for Trillions... At Our Expense
The truth is the banks have been fighting the Volcker Rule since it was first floated.
The Rule, named after legendary former U.S. Federal Reserve chairman of the 1980s, Paul A. Volcker, goes into effect in 2015 and has lots of moving pieces.
For instance, it says banks can't have ownership stakes in hedge funds or private equity shops and can't gamble in the markets like they did in their good-old "Trading for Trillions" days.
Collateralized loan obligations (CLOs) are one of the "instruments" or "products" banks still want to trade.
The Volcker Rule says they can trade the simplest version of CLOs, those that have commercial loans in them.
But they're not allowed to trade CLOs that contain bonds, or equity, or other assets papered around CLO packages.
Not that there's anything simple about collateralized loan obligations.
They're complex from the get-go. And some varieties are a lot more complex and dangerous than others, though to the naked eye they look pretty much the same.
What the banks are bitching about is how they'll be restricted in their ability to trade the CLOs they want to own. Did you catch that?
That's right: They want to "trade" these things. That's important.
A lot of the CLOs will be put together by hedge funds and private equity (PE) shops. And that's one of the big problems: Hedge fund and PE products are supposed to be off limits.
What are collateralized loan obligations anyway? Here's what they are - and why they're so outrageous.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.