Of Proprietary Trading and Credit Default Swaps – Mission Accomplished
Courtesy of Jesse’s Café Américain
Here’s why the Volcker Rule ran into a brick wall of Senatorial gravitas and pusillanimous punditry.
Give up prop trading AND banking status? The mutant Zombie Banks would not allow it.
Who needs insured deposits? What a bother. Its the Treasury guaranteed bonds and Discount Window access that count. When you are levering up Other People’s Money you want it in bulk and wholesale, not retail.
Goldman is no surprise, because they are nothing but a hedge fund with the right connections and a rolodex full of Senators. But JPM bears watching, since they are at least nominally a bank, and Too Big Not To Leave a Mark (TBNTLM).
Prop trading – why lend when you can play at the tables?
Well, at least we have the Credit Default Swaps situation covered with the bailout of AIG, right?
Well, maybe not…. Two trillion down, but thirteen trillion to go.
I can see why the Fed completely failed to notice this little trend change in its banking oversight.
If the markets turn significantly lower, and the banks’ balance sheets start wobbling again, and threaten to crash the system, or else, perhaps Obama can send young Tim up to the Congress with another scribbled request for a trillion dollar bailout. I can hear the sound of knives being drawn as he walks in the door…
