«The 2008 financial crisis and the recession that followed were caused, in large part, by the biggest global banks taking huge risky bets that went bad. Now, a decade later, US regulators are considering a proposal to gut the Volcker rule, a post-crisis regulation that was written to prevent that problem from happening again. The consequences could be as damaging as they are predictable.
We have been here before. In the 1920s, banks and financial groups also made huge bets. When they soured, the system collapsed, taking the world economy with it. In the 1930s, Glass-Steagall was enacted to separate our critical banking system from these types of trading activities. When that law was repealed in 1999, some predicted disaster. They were right.
In 2010, Congress enacted the Dodd-Frank reforms. Senator Carl Levin and I fought to include a modern version of the Glass-Steagall Act. Dubbed the Volcker rule, after a former US Federal Reserve chairman, it sought to prevent bankers from using taxpayer-backed dollars to take risky positions and from betting against their customers. The goal was to make banking boring again.
(...)
The overall objective of these proposals is clear: to gut the Volcker rule. That is a mistake. US families and businesses should not be forced to endure another financial crisis borne of regulators loosening rules that were custom-designed to protect them from big banks’ bets. Do not bring back the bad old days.
The writer, Democratic senator for Oregon, co-authored the Volcker rule with Carl Levin, a former senator, who also contributed to this article»
(Financial Times)
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