What is the Volcker rule? The headlines in the press describe a nebulously defined financial regulation as being the second coming of financial reform Yet the only thing clear about the Volcker rule is who it is named after, former Federal Reserve chair Paul Volcker. The Volcker rule was a last minute financial regulation rule in an attempt to stop speculative trading by Wall Street. It has been politicized, lobbied against, delayed, watered down and modified heavily.
Barclays was busted for manipulating the LIBOR. The London Interbank Offered Rate is the interest rate banks charge to lend to each other. This key interest rate sets most banking transactions, including retail. Manipulating the Libor is like being a casino with crooked roulette wheels and loaded dice.
Barclays has been fined £290m ($450m) for trying to manipulate a key bank interest rate which influences the cost of loans and mortgages.
Marcus Agius will step down from Barclays as soon as Monday, amid fallout from the bank's $453 million settlement of probe into Libor manipulation.
On Wednesday the U.K's Financial Services Authority announced to the world Barclays manipulated the Libor and was fined. Below is some of the FSA's press release:
The FSA has today announced that it has found serious failings in the sale of interest rate hedging products to some small and medium sized businesses (SMEs). We believe that this has resulted in a severe impact on a large number of these businesses. In order to provide as swift a solution to this problem as possible we have today confirmed that we have reached agreement with Barclays, HSBC, Lloyds and RBS to provide appropriate redress where mis-selling has occurred.
This one man apology show is about the $2 billion or greater trading loss JPMorgan Chase incurred due to speculative derivatives.
Truth be told the hearing was softball, not a grilling. This should be no surprise since JPMorgan Chase gives a lot of campaign contributions including those on the Senate Banking Committee.
Dimon revealed very little about the trade and not much more about his knowledge of it. He refused to discuss details of it, lest he reveal secrets to competitors -- who already know all about the trade and have been hammering JPMorgan on it, adding to the bank's losses. But the committee didn't challenge him on that, even after he turned down an offer to close the hearing to the public.
The below Bloomberg Law interview, or shall we say cage match, is just amusing. First, Chris Whalen tries to claim the reason JPMorgan Chase placed a bet that will lose $2 billion or greater is due to JPMorgan Chase being distracted by those pesky regulators. Yes, you will laugh out loud at this.
What a surprise, that biggest fighter against financial regulation of them all, JPMorgan Chase accrued a $2 billion dollar loss:
The $2 billion loss came from a complicated trading strategy that involved derivatives, financial instruments that derive their value from the prices of securities and other assets. JPMorgan said the derivatives trades were part of a hedge, meaning they were set up to offset potential losses on the bank’s large holdings of bonds and loans.
That loss was caused by derivatives and credit default swaps and in part due to a Value at Risk model. This is the same type of model which was part of the financial crisis and has been warned about repeatedly for not being mathematically complex enough to base one's gambling debts on. No surprise a VaR model was behind the loss.
It produced large losses even without extreme movements in the derivatives markets or underlying bond markets.
Another financial crisis, a prolonged recession, or changing political ideologies could cause a re-examination of the status quo and lead to a decision to break up the big banks. If that should happen, policy makers could well take another look at the Public Utility Holding Company Act of 1935 as a model for accomplishing such a breakup over a limited time span of, say, seven years. The political mood is already shifting. The 1980s mantras -- government regulation as problematic, free-market competition as an unquestioned good, financial engineering as worthwhile innovation and finance as more important than commercial and industrial enterprise -- are now being reconsidered. This could lead to a more responsible balance between government, finance and industry. Dodd-Frank, despite its length and complexity, is only the beginning of real regulatory reform. It's a continuation of the complexity of already overly complex financial and regulatory systems. What we need is a simple regulatory scheme to create a simpler banking system.
Rob a 7-11 with a gun? Get at least 20 years in prison. Rip-off investors to the tune of $1.6 billion, get no jail time, no charges and you don't even need to make restitution. MF Global represents yet another example how financial crime goes unpunished and not penalized.
We know MF Global played around with customer's money. The amount they lost is even larger than originally estimated, now at $1.6 billion bucks. Seems there is $700 million overseas and that branch of MF Global in the U.K. ain't giving the money back.
Matt Taibbi has written an autopsy report on the lack of real financial reform and how it happened. In Wall Street's Big Win, Taibbi first sums up what happened in the last decade:
The huge profits that Wall Street earned in the past decade were driven in large part by a single, far-reaching scheme, one in which bankers, home lenders and other players exploited loopholes in the system to magically transform subprime home borrowers into AAA investments, sell them off to unsuspecting pension funds and foreign trade unions and other suckers, then multiply their score by leveraging their phony-baloney deals over and over. It was pure financial alchemy – turning manure into gold, then spinning it Rumpelstiltskin-style into vast profits using complex, mostly unregulated new instruments that almost no one outside of a few experts in the field really understood. With the government borrowing mountains of Chinese and Saudi cash to fight two crazy wars, and the domestic manufacturing base mostly vanished overseas, this massive fraud for all intents and purposes was the American economy in the 2000s; we were a nation subsisting on an elaborate check-bouncing scheme.
Many of us contend the dot con bust, 9/11 fueled, offshore outsourcing 2001 recession never really recovered. It was masked by the glorified ponzi scheme described above.
Former Fed Chairman Paul Volcker and Jacob A. Frenkel (Group of 30) released a new report,
The Structure of Financial Supervison: Approaches and Challenges in a Global Marketplace
The attached paper recommends a restructuring on financial market supervision called Twin Peaks.
Both Presidential campaigns have mentioned major structural and regulatory reforms of the financial systems. Volcker is advising Obama and please note, the other paper authors, many are from surviving financial institutions and yes, yet once again, Goldman Sachs is represented.
Barclays was busted for 
The Senate Committee on Banking held a hearing, 
What a surprise, that biggest fighter against financial regulation of them all, JPMorgan Chase accrued a 
That loss was caused by derivatives and credit default swaps and in part due to a 
Meet 
Rob a 7-11 with a gun? Get at least 20 years in prison. Rip-off investors to the tune of $1.6 billion, get no jail time, no charges and you don't even need to make restitution. MF Global represents yet another example how financial crime goes unpunished and not penalized. 
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