I’ve chosen the ever popular Volker Rule to write about for my final paper. For those of you who don’t know this controversial piece of legislation is attached to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Essentially, what it does is take away proprietary trading desks for major banks. These desks are huge money makers for banks like Goldman Sachs and Morgan Stanley because instead of trading their clients’ money, they are trading their own money. They are basically making themselves money without thinking about their main clients.
In a time when the fate of Wall Street and banking is amidst debate, the Volker Rule is one of the most important clauses of Dodd-Frank. In a time when Wall Street is also dealing with backlash from the “99%”, the Volker Rule is of the utmost importance. This piece of legislation is going to hit banks where it hurts, their revenues. Some banks like Goldman and MS will be hit hard by this reform due to a big chunk of their revenue coming from their proprietary desks.
I have taken a stance on this issue being that this reform will be a good thing for the future of Wall Street. Banks will not be taking on as much risk, which means there will be less of a risk for another catastrophic event, like what happened in 2007. They will be able to approach their business in a more stakeholder driven model, which before might not have been the case. However, I wish to show how political influence and lobbying has driven this bill into a heated debate. It’s become a bill that is riddled with ulterior motives from lawmakers who care more about having the support of Wall Street. Ultimately, the fight against both sides of the issue is being drawn out and the bill continues to be edited and redrafted. My take on this bill is that it’s going to end up once again in the favor of Wall Street. There will loopholes.