Volcker Rule

After sleeping it off and giving a little tough on Barack Obama’s  proposal of new financial regulation I still think this is HUGE. Because it is so HUGE, I have some doubts how the final version would look like. Similar as with health care reform, a strong opposition backed by almost unlimited (lobbying) funds will arise.

If it turned to a law it will cripple “Bank Holding Company” earnings.  Goldman Sachs, Morgan Stanley, Bank of America, JP Morgan Chase and Co. could be especially hit losing maybe even a half of the earnings. Off course, their proprietary trading desks are worth a lot and they could be spun off, but they would lose both financing and information advantages.

If it is implemented as U.S. President announced we could even talk on systematic U.S. banking risk, because big bank holding companies were using cheap financing (courtesy of FED) to fund proprietary trading and “healing” their balance sheets.

Definitely a potential game changer…

Bloomberg story on Mr. Volcker: ‘Volcker Rule’ Vindicates Former Fed Chief’s Regulations Push.

Elsewhere in the world, Asia ended in red, Europe is trading at -1% on average. Greece is still big issue. They are trying to place a new  bond issue, the issue size is almost double today than reported yesterday. Bloomberg story: Greece to Sell Bonds in Near Future, Debt Chief Says. The odds that they will manage to sell the bond on their own are minimal in my view.

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This entry was posted on Friday, January 22nd, 2010 at 7:50 am and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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