The Volcker Rule Explained | The New York Times

[Music] Panic hit in 1907 again in 1929 and again 5 years ago in 2008 Banks get in trouble once in a while boom bust that's the way this business goes but when Banks hit the wall it's not just their problem it's everyone's which is why we're getting the vulker rule it's supposed to make the whole system safer the question is will it really do that it is time for courageous action to start thinking about the answer let's go back to the depression FDR separated everyday banks in Wall Street with the glass steagle act the idea was to protect depositors and prevent a repeat of the 29 crash we also got FDIC insurance so people wouldn't get wiped out when their bank went under the FDIC like other National and state agencies also conducts rigorous examinations of its member biks this gave us 50 years of relative calm but Wall Street never likes rules Banks complained that glass deagle was getting in the way of their profits and strangling investment FDR's law lasted until the 1990s when another Democrat came to office my fellow citizens today we celebrate the mystery of American renewal President Clinton rolled back glass deagle letting Banks expand onto wall Street's Turf things like trading and underwriting sure enough another panic hit in 2008 along with the Great Recession before the glass Eagle Act was repealed it had been breached there was already a total murder practically of commercial and investment banking so here we are 5 years later with Washington writing rules again the vulker rule is part of Dodd Frank and it's named for Paul vulker the former fed Chief who wants to keep Banks from using depositors money to gamble in the markets no more fast money trading no more hedge funds no more private Equity deal making all that's off limits once again Banks hate the idea they've had to shut trading desks that powered their profits back during the boom and the vulka rule could eat into the 44 billion or so that Banks take in making markets but this isn't the financial reform of the 30s and that's what some say we need right now those two big to fail banks have gotten two bigger after a bunch of mergers the top six now control about a third of all deposits even after bulker those big Banks can still engage in a variety of Wall Street businesses like underwriting new IPOs and trading for customers where the lines can sometimes get blurry and many Hot Shot Traders have left the banks for hedge funds which are more lightly regulated so the risks may have just gone from one side of the street to the other and keep in mind Wall Street has a knack for getting around all sorts of rules the vula rule will be no [Music] different

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Id: 7NL77GC2vLw

Length: 3min 0sec (180 seconds)

Published: Wed Dec 11 2013