Notwithstanding the abundant historical evidence showing the deleterious effects of not regulating big money players, many conservatives still argue in favor of as much deregulation as possible.

The simple truth is that for a game to be fair to all the players, there need to be rules of the game and umpires to make the calls and impose penalties where cheating and errors occur. We’ve seen an erosion of this for decades, and the consequences have been devastating.

One of the more damaging phenomena in our economic system is the blurring of lines between the role of banks as a service to their customers, and their own pursuits of profits in the market. The reversal of the Glass-Stegall Act during the Clinton administration removed the distinction between investment banks and conventional ones.

That being the case, the following news, if inadequate in scale, is good.

SEC backs ban on banks trading for own profit


WASHINGTON (AP) — The Securities and Exchange Commission Wednesday backed a proposal to bar banks from trading for their own profit instead of their clients.

The SEC voted 4-0 to send the ban on so-called proprietary trading out for public comment. The rule was required under the financial regulatory overhaul.

Critics on the left have dismissed the effort as weak and marred by loopholes. Banks argued it would hurt the economy.

The SEC is the third federal regulator to support the proposal, called the Volcker Rule after former Federal Reserve Chairman Paul Volcker. On Tuesday, the Federal Deposit Insurance Corp. and the Federal Reserve both backed it.

For years, banks bet on risky investments with their own money. But when those bets go bad and banks fail, taxpayers may have to bail them out. That happened during the 2008 financial crisis.

Under the proposal, banks must hold investments for more than 60 days and bank managers must make sure employees comply with restrictions.

The public has until Jan. 13 to comment on the rule, which is expected to take effect by July after a final vote by all the regulators. Banks would have until July 2014 to comply.

Critics on the left contend that the rule as written is too vague and its effect on risk-taking will be limited. Banks have a history of working around rules and exploiting loopholes. In this case, banks can make most trades simply by arguing that the trade offsets another risk that the bank bet on.

Wall Street banks say the ban on proprietary trading could prevent them from buying and selling investments that their customers might want.

SEC Commissioner Troy Paredes, a Republican, on Wednesday echoed Wall Street’s criticism. He said the restrictions could dry up the flow of securities trading in the markets and would impose a heavy compliance burden on banks. Still, Paredes voted to approve the draft the rule.

The rule also would limit banks’ investments in hedge funds and private equity funds, which are lightly regulated investment pools. Banks wouldn’t be allowed to own more than 3 percent of such a fund. A bank’s investments in such a fund couldn’t exceed 3 percent of its capital.

Banks could still put their clients’ money into those funds. They will still be able to manage such funds, and collect fees and a percentage of trading profits.

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29 Responses to “New SEC Rules For Banks”

  1. downey faivetty says:

    Heidi: Those who would be unhappy with the cuts to the SEC are those who are honest brokers and traders. Those who who are happy with the cuts are the crooks who cause things like the housing loan crisis, derivatives scandals, energy crisises and the Ken Lay, Skilling, Madoff, Milken

  2. merslevson khambounth says:

    For all of my friends at Occupy Denver! We at Occupy Wall Street are honored by your courage and determination. proud that people like you are on the side of the 99 percent! The 1 percent should be shaking in their boots now they have the 99 percent is awaken nation and worldwide! God bless you and may peace be with you always!

  3. denga warwoodell says:

    Editor’s Note: The following post comes to us from Paul Beck and Ganapathi both of the of Accountancy at the University of Illinois at Urbana-Champaign. In our paper, Did the SEC Impact Banks’ Loan Loss Reserve Policies and Their Informativeness?, which was recently made publicly available on SSRN, we study the joint impact of the SEC’s intervention in bank regulation during the late 1990’s and earnings management. In contrast with traditional bank regulators who focused on understatement (adequacy) of banks’ loan loss reserves, the SEC was concerned with overstatement of loan loss reserves to manage income. The SEC’s intervention in banking regulation involved several initiatives. These included investigations of banks that were alleged to have overstated loan loss allowances, the issuance of loan loss guidance in Staff Accounting Bulletin (SAB) 102, and pressuring traditional bank regulators belonging to the Federal Financial Institutions…

  4. lol thanks, I think the reason that they don’t want a centralized leader is that they want it to be an expression of all the people there. it’s going to tke them a long time to get the message out as well.

  5. kehlenkell says:

    2.10 – 2.30 Why did McFadden call it “The Bank”? Was this a misunderstanding that the Bank of England was a private corporation? It was suggested in an earlier segment that the moneychangers were behind the of Charles I of England (funding Cromwell and then setting up the Bank of England after Charlie was gone). Can anyone explain?

  6. this is odd, now i cant find the original logo i used to make that gitmo nation one. its like the un logo, but there is a sword and two scales…

  7. palasin khenbertso says:

    keep it up guys these are the best videos ever! 😀 and good beat on this one, but you need even more better beats guys. 😀

  8. The of suicide a CDC responsibility. The last time I looked at the NIMH website stats, 2007 was the latest year. Recent skew numbers down. The numbers included this caption – obviously white males are extremely higher than any other suicide category. Not only higher but the graph shows 35,000 white males, 20,000 white females.The other categories were a blip in comparison. White genocide is commented frequently here on YT and has merit. – I am not going down quietly.

  9. HMcQ: “If you listened to the news 24 hrs a day, what would you learn abt the current economic crisis? [pause] NOTHING!”

  10. do some research & see that the Glass-Stegall act prevented financial meltdowns for 75 years & was repealed by GOP Sen Graham

  11. sanason says:

    US fed govt- Close dept of Ed, Roll back all regs to 1995 (Glass stegall back in),No public sector unions

  12. gash danideridg says:

    Abbott is out of the country NOT talking down the economy and buyers spend $37k each online as Subaru pockets $5.5 million in orders

  13. Today I’m playing my favorite new game: Will Occupy Wall Street even notice that today is their anniversary? Answer so far? Nope

  14. tile toski says:

    I do believe a log has more intelligence than you……..Get rid of Dodd-Frank and bring back Glass-Stegall……D-F is destroying small businesses and small banks, but yet the Dems live and love D-F for that reason, destroying jobs.

  15. hirinder ehm says:

    Just for a sec, try on this thought: “Publishing is fine, comments aren’t broken, stop trying to fix what works.” How’s it feel?

  16. Not much. Usual Occupy Wall Street B.S. But according to Libé billionaire owner Rothschild, it was a great marketing op

  17. ROME (Reuters) – Two of Italy’s biggest unions marched through Rome on Friday to protest against Prime Minister Mario Monti’s cuts in public spending as opposition grows to austerity policies aimed at steering the country out of its economic crisis.

  18. chan deportz says:

    As Greece redoubles its to cut its debt and stoke its economy, privatization is viewed as a last hope for luring foreign cash. But the has been sputtering.

  19. strockween says:

    Tea senator wants JPMorgan CEO to ‘guide’ Congress on banking regulation | The Raw Story | DeMint, of course. –

  20. Geneva, Dec 11 (Prensa Latina) Gender labor disparities and different situations in some regions of the planet have worsened since the outbreak of the economic crisis in 2007, warned the …

  21. pter nuaudert says:

    Japan’s composite output PMI slips to 49.3 in December from 49.9 in November, by a sharp fall in manufacturing but by the service sector, with the Business Activity Index edging up to 51.5 from 51.4. A rise in service-sector confidence to a 5-year high “augers well for future activity,” says Markit, although with manufacturing in the doldrums, Japan’s economy will probably continue struggling in the (PR) Post your comment!

  22. semmeniani says:

    Great point!!! It was Neocon Summers who instigated the repeal of Glass Stegall that got this whole mess rolling in… –

  23. Marxism inside a country can be like a angry mob. No target. Just to destroy what they hate. Usually who are rich. Occupy Wall street.

  24. good cos I haven’t, only cos it’s a pointless day based around money for the economy so you’re cool 🙂

  25. luceld saudo says:

    ECB’s Constancio: may need public money in bank failures via But of course. Too many of too big to fail

  26. chetteaury says:

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  28. nepany lafazirson says:

    Belgian government(s) took in record 51% and spent 53.9% (1983: 62.2%) of GNP. You’re supposed to manage the economy, not devour or choke it

  29. Why retailers are pinning hopes on Pinterest: After a tough day at work as a publicist in Minneapolis, Becca B…

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