Click here to check the ultimate guide to learn how to leverage your PC and internet to make money online.
The Washington Independent
The Washington Independent

Banks Already Working Around FinReg Rules

Remember that controversial rule in the financial regulatory reform law, designed to prevent banks from making risky bets on their own behalf? It did not take

Emmanuella Shea
News
Last updated: Jul 31, 2020 | Jul 31, 2010

Remember that controversial rule in the financial regulatory reform law, designed to prevent banks from making risky bets on their own behalf? It did not take long for banks to figure out how to get around it. At The Atlantic, Daniel Indiviglio explains that banks including Goldman Sachs are just reclassifying “proprietary traders” — ones who trade the company’s own money — as “asset managers.”

One of the more aggressive new requirements, the so-called Volcker Rule, would limit proprietary trading to 3% of Tier 1 capital. But the rule may be easy to sidestep. Goldman Sachs is leading the way around the regulation, by simply reclassifying many of its prop traders as asset managers. One major initial criticism of the Volcker rule was that it’s hard to distinguish prop trading from market making. Goldman is using this blurry line to its advantage.

The problem is that it is virtually impossible for regulators to tell whether a bank is making a trade for a client or on its own behalf. Shouldn’t it be easy to tell, depending on who keeps the profits or eats the losses? Indiviglio explains, not so much:

Prop Trading

A bank senses that XYZ corp is going to collapse. So its prop traders short the stock by selling stock option contracts to investors who want to bet long on XYZ’s continued success.

Asset Management

A bank senses that XYZ corp is going to collapse. So its asset managers short the stock by selling stock option contracts to their clients who want to bet long on XYZ’s continued success.

You may have noticed that, other than the two strikethroughs which merely changed terminology, those two descriptions were identical. The firm accomplishes precisely the same end. The Volcker rule, thus, boils down to semantics. It’s only prop trading if you fail to classify a trade as “client related.” And there it is — the first big loophole in the new financial regulation bill found and exploited. It barely took a week.

The score so far: Big Banks 1, Congress 0

[

](http://www.theatlantic.com/business/archive/2010/07/goldman-hops-over-the-volcker-fence/60690/)

Emmanuella Shea | Emmanuella Shea is a professional financial analyst with over 9 years of experience in the financial markets. Emmanuella is still concerned about the long-term stability of multimillion-dollar financial portfolios. She is skilled at persuading and manipulating high-ranking individuals in addition to her work as a Financial Analyst. Her decisions are trusted and respected, and her views are highly regarded. Her long-term ambition is to work as a policy advisor at the national level. She wants to use her unwavering dedication and drive to help developing-country people gain more dignity and autonomy.

Related

$1.89 billion given to states to fight HIV

The federal government Monday announced more than $1.89 billion in funding to states to fight the HIV epidemic with access to care and with more cash for the failing AIDS Drug Assistance Program. According to an HHS press release , $813 million of that money will go directly to the ADAP programming. An additional $8,386,340 will be issued as a supplement to 36 states and territories currently facing a litany of unmet needs and access issues.

Army Data Shows Constraints on Troop Increase Potential

If President Obama orders an additional 30,000 to 40,000 troops to Afghanistan, he will be deploying practically every available U.S. Army brigade to war, leaving few units in reserve in case of an unforeseen emergency and further stressing a force that has seen repeated combat deployments since 2002.

1. Brian Schweitzer

As governor of Montana, Schweitzer doesn’t represent one of the most highly populated, high-profile electoral states in the country. But this

$1.3 Million for Brown

The GOP’s candidate in the Massachusetts special election raised more than one million dollars -- double the goal -- in a 24-hour moneybomb on the Ron Paul

$1.3 trillion in federal spending unaccounted for, report finds

Despite calls for independent bodies to keep government accountable, the Sunlight Foundation’s most recent Clearspending report has found the federal

#1 in Conspiracy Theories

Andrew Young’s tell-all biography of John Edwards, hitting shelves next week, is surging in one Amazon.com category in particular. #1 in Conspiracy

1 Brigade and 1 Battalion

ISTANBUL – It’s 10 p.m. in the lowest level of the Istanbul airport. In 20 minutes I’ll be allowed to board my plane to Kabul, bringing me to the

$1 Million for Toomey

Pat Toomey, the former Club for Growth president and leading Republican candidate in Pennsylvania’s 2010 Senate race, has announced a $1 million haul in the

1. Lindsey Graham

Sen. Graham (R-S.C.) is typically regarded as a reliable vote for his party, but he took the bold step of breaking with his fellow Republicans to join Kerry

Bachmann uncomfortable over earmarks ban

Republicans appear to have boxed themselves into a corner with their portrayal of earmarks as wasteful spending, as many of them have backed a moratorium on

Troubled mine holds hope for U.S. rare earth industry

China currently controls 97 percent of the world’s rare earth production. The Mountain Pass Mine could change that -- if it can overcome serious environmental concerns.

© Copyright 2021 The Washington Independent All Rights Reserved

Terms & Privacy | twi.news@washingtonindependent.com

Click here to check the ultimate guide to learn how to leverage your PC and internet to make money online.