Ban on Prop Trading or Bank Status...Volcker Rule

[Joy Pathak]

FT.com / Companies / Banks - ‘Volcker rule’ gives Goldman stark choice

‘Volcker rule’ gives Goldman stark choice


Goldman Sachs and other banks should give up their bank status if they want to avoid the ban on proprietary trading proposed by the White House, Paul Volcker, head of President Barack Obama’s Economic Recovery Advisory Board, said.

“The implication for Goldman Sachs or any other institution is, do you want to be a bank?” Mr Volcker said in a video interview with the Financial Times. “If you don’t want to follow those [banking] rules, you want to go out and do a lot of proprietary stuff, fine, but don’t do it with a banking licence.”


What do you guys think about this?

 

[Uncle Max]

Goldman is not a bank. It switched to the bank status to have access to cash during the crisis time. But they can easily switch back now.

In general this is good rule, firms shouldn't have access to cheap cash if they want to make prop bets.

And, of course, this law will be good for Goldman, because for their main competitor Morgan Stanley it will be harder to switch back from the bank status.

 

[Ken Abbott]

Goldman is a Bank Holding Company and is a state-chartered bank. It is subject to Fed regulation, but not that of the OCC. It would not be easy for them to switch back - they would likely be accused of regulatory arbitrage.

 

[const451]

Wasn't Glass–Steagall Act all about that?