FDIC backs ban on banks trading for own profit

[xchrom]

http://hosted.ap.org/dynamic/stories/U/US_VOLCKER_RULE?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-10-11-10-36-33

WASHINGTON (AP) -- Banks would be barred from trading for their own profit instead of their clients under a rule being proposed by federal regulators.

The Federal Deposit Insurance Corp. backed the rule on a 3-0 vote. The ban on so-called proprietary trading was required under last year's financial overhaul law.

For years, banks had bet on risky investments with their own money. But when those bets go bad and banks fail, taxpayers could be forced to bail them out. That's what happened during the 2008 financial crisis.

The Federal Reserve also approved the draft rule. The Securities and Exchange Commission and Treasury Department must still vote. All four regulators will vote on a final version of the rule after a period of public comment. It is expected to take effect next year.

[banned from Kos]

1. But, but, I'm told that Democrats are owned by the bankers!

(sarcasm intended)

[JuniperLea]

2. LOL!

Yeah, mighty holes are being torn in all those RW talking points that are being furthered by alleged Democrats.

[FBaggins]

3. It's ok to trade for their own account... they just shouldn't do it "naked".

There's nothing wrong, for instance, with derivative investing... so long as you're hedging a position in the other direction. So if your portfolio is particularly sensitive to interest rate increases, it would be ok to get a leveraged investment that would perform well in that environment.

Such a move actually reduces risk and should not be banned. It's the banks that made big "naked" bets that got caught with their pants down.

[uponit7771]

5. It's them using other peoples money to do so and the solvency of their bank. Both of those...

...are a good reason to tell them no, especially if they're looking for a handout later.

[xchrom]

4. another article: Volcker Rule Plan Released by Regulators

http://www.bloomberg.com/news/2011-10-11/volcker-restrictions-on-banks-trading-set-for-release-by-fdic.html

U.S. regulators requested public comment on Dodd-Frank Act restrictions that would ban U.S. banks from making short-term trades of financial instruments for their own accounts and prevent them from owning or sponsoring hedge funds and private-equity funds.

The so-called Volcker rule, released today by the Federal Reserve, the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency, is aimed at heading off risk-taking that helped fuel the 2008 credit crisis.

The language of the rule is little changed from drafts that have been leaking in recent weeks. It would ban banks from taking positions held for 60 days or less, exempt certain market-making activities, change the way traders involved in market-making are compensated and make senior bank executives responsible for compliance.

The board of the FDIC is voting today on whether to seek comments on the proposal through January 13. The Federal Reserve also said it would accept feedback by that date.


edit: spelling is a problem today.

[Swede]

6. K&R