About that "toothless" Dodd-Frank reform...

Dodd-Frank is widely written off as meek, weak and watered down by relentless bank lobbying.  Perhaps it is in many respects. But the long-unfinalized and tortuously complex Volcker Rule, largely eliminating the banks' proprietary trading and in-house hedge and private equity funds, has already had significant effect, as the WSJ's Scott Patterson recounts:

Regulators aren't expected to start strictly enforcing the Volcker rule until 2015, giving banks some breathing room. Because the rule was widely anticipated, most banks already have done away with operations focused on proprietary trading, or making bets with their own money.

For example, Goldman shut down in 2010 its Principal Strategies in-house trading unit, partly as a response to the looming Volcker rule. Last month, Goldman Chairman and Chief Executive Lloyd C. Blankfein outlined other steps being taken by the New York company to comply with the Volcker rule, including "winding down our hedge-fund investments."

Moreover, the relative hawks in the contentious five-agency rule-writing process, most notably outgoing CFTC Chair Gary Gensler, seem to have in large part prevailed on key issues in the rule's pending finalization next week:

Frank Rich wrote his column too early this week

Credit Frank Rich with warning Obama early and often to get "in front of the anger roiling a country where high unemployment remains unchecked and spiraling foreclosures are demolishing the bedrock American dream of home ownership," as he puts it in today's column. He's been sounding this note since last spring. The event has proved him right. He may be our most astute reader of media memes, popular mood, and political posturing.

Today he's at it again. But he seems to have written his column before Obama proposed his "Volcker rule" banning proprietary trading and internal hedge funds - and then gone back and just inserted a brief allusion to it after the event, without at least partially recasting the column as the Thursday event required.


Here's Rich's brief acknowledgement of the turn to Volcker:

Obama needs more independent economists like Paul Volcker, who was hastily retrieved from exile last week after the Massachusetts massacre prompted the White House to tardily embrace his strictures on big banks.

Tory Hallelujah

Bulletin to those claiming that Obama's proposed ban on proprietary trading etc. for deposit-taking banks will drive major banking operations overseas (FT):

Tories ready to follow Obama’s lead

The UK opposition Conservative party is likely to follow the lead of Barack Obama , US president, and introduce similar trading curbs for banks based in the City if elected, George Osborne, the shadow chancellor, said Thursday night.

The Tories – widely expected to win a general election which is due within four months – fired a warning shot across the bows of financial institutions including Barclays, Deutsche Bank, Credit Suisse and UBS,saying the Obama crackdown on proprietary trading was “definitely something we think needs to be done”.

When the Brits slapped their giant tax on bank bonuuses, they were covered by similar action fom the French and Obama's proposed tax on bank liabilities.  If the Volcker rule gets traction, other major banking centers will probably follow suit.