HUFF POST: …This week, the government took a big first step toward shutting down the Can’t Lose Room in the Wall Street Casino. The Volcker Rule, a proposal to limit the kinds of risky investments that banks can make, went before four government agencies. On Tuesday, the FDIC unanimously approved the rule, the Federal Reserve backed it, and on Wednesday, the Securities and Exchange Commission followed suit. The final version of the rule is now up for public comment for 60 days.
It’s too soon to know exactly how the rule will shake out and how consumers will ultimately be affected. The hope is that it will mean taxpayers won’t be on the hook again to bailout banks who gamble with their retail customers’ cash.
Using bank deposits to make risky investments, a process known as “proprietary trading,” isn’t new — but for decades it was illegal. The Glass-Steagall Act, a law forcing banks to close their investment/brokerage wings, was passed in 1933, in the middle of the Great Depression. By driving a wedge between boring banking and dangerous, sexy investing, the law sought to stabilize the banking system, and reduce the rampant conflicts of interest that plagued it… (more)
