Dodd-Frank

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Goldman Sachs Stock Price Can't Escape Volcker Rule Time Bomb

By , Associate Editor, Money Morning • @JimBach22 -

goldman sachs stock price

The Goldman Sachs stock price fell yesterday (Thursday) on what was a wildly successful earnings season for the investment banking giant.

Goldman Sachs Group Inc. (NYSE: GS) earnings crushed estimates across the board. But traders on the day were correct in their assessments. GS stock is not one to pile into right now.

In fact, big bank stocks are not the best place to put your money. And Goldman Sachs has its own challenges ahead...

Volcker Rule Means "Sleepless Nights Ahead for Bankers"

By , Contributing Writer, Money Morning -

After two years of review and lengthy revisions, all five regulatory agencies unanimously passed the controversial Volcker Rule on Tuesday.

The 953-page new version of the Volcker Rule imposes a strict ban on proprietary trading (when banks use their own funds to make trades). In effect, it bans banks from trading for their own gain. Included in the revised version is new wording targeting the sort of risk taking that was responsible for last year's $6 billion trading loss at JPMorgan.

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Congress Just Played a Trick on American Taxpayers

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

After the debacles of 2008, you'd think that Congress would be looking for more ways to restrict Wall Street's excesses. But for some reason, the House just passed a bill that does the exact opposite - it actually reduces restrictions that were put in place to try to prevent a repeat of the nightmares of 2008.

You won't believe why they thought this would be a good idea...

Why the Dodd-Frank Act Didn't Work

By , Executive Producer, Money Morning -

On July 21, the Dodd-Frank Act turned three years old.

But, unlike most three-year-olds who can walk and talk, this one hasn't gotten out of the crib yet...

You see, the Dodd-Frank Act was a promise to protect Americans from the excesses and ruthlessness of Wall Street. It was meant to streamline the regulatory process.

But three years later, we are still waiting for its full implementation.

In fact, as of last week, only 155 of 398 rules required by this law are considered final.

That's because instead of focusing on the systemic problems that caused the crisis, the pen to write the bill ended up in the hands of disconnected agencies and lobbyists.

Instead of fixing the serious problems of current law, Dodd-Frank failed to curtail Wall Street - just a few years after a major financial crisis.

At a time when Sen. Elizabeth Warren, D-MA, and Sen. John McCain, R-AZ, have pushed for a new Glass-Steagall Act to reduce risk, some voices like Treasury Secretary Jack Lew argue that the Dodd-Frank bill will alleviate the problems of Too Big to Fail, systemic risk, and cronyism.

But we know that such arguments are spurious at best.

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The Next Fed Chief Will Be the Most Powerful of All Time

By , Associate Editor, Money Morning • @TaraKateClarke -

The U.S. Congress established three core objectives for monetary policy in the Federal Reserve Act of 1913: maximum employment, stable prices, and moderate long-term interest rates.

But in addition to acting as steward of the economy, the Fed's role has expanded over the years.

The Great Recession, a need for corporate bailouts, and concerns over the Fed's secrecy brought about recent changes to its institutional identity.

Certainly we've had a renewed focus on the Fed's responsibility as a regulator.

People wanted to see - needed to see - a Fed that operates no longer as a creature of the banks, but as a watchdog instead.

Emblematically, the Dodd-Frank Wall Street Reform and Consumer Protection Act were signed into law in July 2010.

With it, Dodd-Frank brought the most substantial changes to financial regulation since the aftermath of the Great Depression. Particularly, a greater breadth of regulatory power was given to the Fed.

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Fed Lets Banks Off the Hook... Again

By , Associate Editor, Money Morning • @DavidGZeiler -

We've told you before that the U.S. Federal Reserve puts Wall Street's interest above that of the American public. And yesterday (Wednesday) the central bank proved it... again.

Confronted with the opportunity to enact meaningful change to the regulatory system, the Fed punted on its responsibility to protect the public from the very banks that brought down the global economy.

This once again proves that the Fed, far from being a guardian of public welfare, is actually on the side of big banks.

"The Fed is an agent of the banks and, as such, it continues to come up with new ways for them to make money, risk free," said Money MorningCapital Waves Strategist Shah Gilani.

This time, instead of proposing strong guidelines that would actually do something to avoid another crisis caused by too-big-to-fail banks, the Fed put forth a plan that lacks key details and leaves important decisions in the hands of international regulators in Basil, Switzerland.

Specifically, the Fed proposal is hazy on capital requirements and minimum liquidity levels, which are crucial to ensuring a bank survives a financial emergency.

Delay has been a common theme for agencies charged with creating the regulations set out in Dodd-Frank. As of the beginning of December - 18 months after Dodd-Frank was signed into law - fewer than 25% of its hundreds of new rules have been finalized.

On Tuesday, it was the Commodity Futures Trading Commission (CFTC)voting to delay until July of next year regulations governing derivatives - the financial instruments that were at the very heart of the 2008 financial crisis.

And by forfeiting its chance to effect change, the Fed left the United States even more vulnerable to another financial crisis.

Now, not only have these vital regulations been delayed, but the process gives well-connected Wall Street bankers three months to "comment" - read "influence" - on the proposals.

Following the Fed's announcement, the banking industry didn't seem particularly worried that the finished regulations, when they do arrive, will cause them much of a headache.

"While these rules will require considerable review and comment from the industry, we are pleased to see the Fed is taking a phased-in approach to a number of these measures," Ken Bentsen, an executive vice president the Securities Industry and Financial Markets Association trade group, told Bloomberg.

A headline on CNBC summed it up nicely: "Banks Breathe Sigh of Relief Over New Fed Rules."

Indeed, Wall Street isn't concerned because at the end of the day, it knows the Fed is its ally.

"The average American has no idea how protected the big banks in this country really are," said Money Morning's Gilani. "Maybe that's because the biggest bank in the world is the U.S. Federal Reserve. And it happens to be a creation of - and 100% beholden to - the banks that it is a master shill for. It also lies to us and covers up Wall Street's misdeeds."



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Our Financial "Regulators" Just Let Us Down Again

By , Associate Editor, Money Morning • @DavidGZeiler -

The Dodd-Frank Act became law 18 months ago, and it may be hard to believe, but we still aren't any better off now than we were then.

Indeed, the regulators that are supposed to be protecting us from a repeat of the 2008 financial crisis can't - or refuse - to get the job done.

In fact, just yesterday (Tuesday), the Commodity Futures Trading Commission (CFTC) voted to move the effective date for rules that would add oversight to the $600 trillion derivatives market to July of 2012.

Derivatives were one of the primary culprits in creating the financial crisis in 2008.

Originally the regulations were to go into effect on July 16 of this year, but the CFTC pushed the date back to Dec. 31. And now, regulations of the item most responsible for the 2008 meltdown won't go into effect until two years after Dodd-Frank was enacted and nearly four years after the crisis occurred.

Other agencies responsible for finalizing the rules set forth in Dodd-Frank, such as the Securities and Exchange Commission (SEC) and the U.S. Federal Reserve, have been just as derelict in their duties.

In short, nothing has been fixed.

As Bad as Ever

"The structural problems are worse," Simon Johnson, a professor at the MIT Sloan School of Management and a former chief economist at the International Monetary Fund (IMF) told the Huffington Post. "[The institutions'] size, incentives -- none of that has changed."

Meanwhile, American citizens still suffering from the fallout of the last crisis are left to worry about vulnerabilities in the system and the ramifications of having a group of financial institutions that are still "too big to fail."



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