Banks May Face Volcker Rule Ending Proprietary Trading

October 11 00:00 2011

NEW YORK, October 10 (RainbowNewsLine.com) – According to information leaked from official sources, the government is planning to bring in the “Volcker Rule” to wipe out proprietary trading and rein in the amount of risks that banks should be allowed to take. Many banks have already downsized their trading desks and some have spun them off into separate smaller entities that may be outside the purview of the act.

This rule comes at the behest of Paul Volcker, the former Chairman of Federal Reserve, who has incessantly stated that the risk taking capacity of banks needs to be reined in. Banks invest a lot of their money in stocks, bond and commodity markets in the so called proprietary trading. Thus banks are effectively taking in money from the public and speculating in the markets in the hope for gains. Many times banks further leverage these amounts considerably. Not only is this jeopardizing the public money, it also creates asset bubbles in the market as excessive amount of money flows in for a small amount of time.

The Volcker rule, which agrees with the views of Paul Volcker may disallow banks from engaging in proprietary trading. The rule suggests that banks should make their money from interest, commissions and charges and not speculate on the market.

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