Person of the Week: Paul Volcker
Paul Volcker – a voice for reasonable regulation on Wall Street
Paul Volcker, for decades a lion in the regulatory community, has had an undeniable impact on the new financial regulations moving across President Obama’s desk. All proponents of Main Street should applaud him. Mr. Volcker, former chairman of the Federal Reserve Board under Jimmy Carter and Ronald Reagan, has recently found his voice as lead Economic Advisor to President Obama. The proof:
The Volcker rule: A key piece of the financial reform legislation, which President Obama signed into law earlier this week. The rule will help ensure a dividing line between commercial and investment banks.
Mr. Volcker hoped for a complete separation of traditional banking from investment/hedge fund banking industries. Recall, this was the way of the world before the drastic deregulation of the 80’s and 90’s. Unfortunately, today’s political reality would not permit such a stark division of commercial banks and investment banks. Instead of a complete separation of functions, the bill that President Obama signed into law limits commercial banks to investing just 3% of their capital in investments that do not benefit their customers. In other words: trading for their own account and perhaps contrary to the interests of their customers and the public. And as we now know getting into enough trouble to need a multi-billion dollar bail out.
Volcker, always a thoughtful proponent of government regulation, was largely cast aside and silenced during the economic booms spurred by deregulation. In a recent interview with the New York Times, Volcker called the idea of a self-regulating market an illusion which he is happy to see shattered.
This week, we salute Mr. Volcker for his efforts on behalf of the Main Street and the public. Despite Wall Street’s kicking and screaming, Volcker’s singular gravitas has successfully stood up to those Gucci wearing lobbyists of the financial industry. Although not enough, the Volcker rule is a step in the right direction. It helps Main Street to be sure. Unless banks find a creative way around it, we should be spared – at least for awhile – the volatility and cost associated with the unbridled greed of banks we all witnessed the last several years.
Assisted by Zachary Kady
