Bank stocks rose and lobbyists rejoiced on Thursday after US regulators voted to gut the so-called Volcker Rule, a set of regulations imposed in the wake of the 2008 Wall Street collapse that limits the ability of financial institutions to engage in high-risk behaviors that threaten the systemic health of the economy.
“This is no longer the Volcker Rule. In the hands of revolving door regulators, turn banks into Trump casinos. Will the inevitable bankruptcy of Trump casinos be far behind?”
—Bartlett Naylor, Public Citizen
“Instead of protecting our financial system in the midst of an unprecedented economic crisis, Trump-appointed regulators are moving forward with their dangerous deregulatory agenda,” Senator Elizabeth Warren (Massachusetts Democrat) tweeted. “Big banks couldn’t be happier about it.”
CNBC reported that the shares of JPMorgan Chase, Goldman Sachs, Wells Fargo and Morgan Stanley “were trading more than 2% more” after five regulatory agencies announced the changes to the Volcker Rule, including the Federal Reserve, Securities and Exchange Commission, and the Federal Deposit Insurance Corporation.
The changes, which take effect on October 1, will make it easier for big banks to devote more of their resources to investments in venture capital funds and other vehicles, the kind of speculation risk that made the entire system America’s financial system plummeted in 2008.
Regulators on Thursday also removed the requirement that banks reserve a certain amount of financial protection to protect themselves against business losses. The reversal could free up tens of billions of dollars for Wall Street banks.
the Wall street journal He reported that combined deregulation shakes hands “Wall Street, one of its biggest victories for the Trump administration.”
Senator Jeff Merkley (D-Ore.), One of the authors of the original Volcker Rule regulations, warned in a statement Thursday that the changes further destabilize the U.S. financial system at a time when the economy is already is recovering from the coronavirus crisis.
“Bank deregulation is exactly the wrong way to boost our economy right now,” said Merkley. “The last thing we need is to follow a public health crisis that has hit our economy with another Wall Street-led financial collapse.”
“It was only a decade ago that millions of Americans paid the price for Wall Street gambling in lost jobs, homes and lifelong savings,” Merkley continued. “Reopening the Wall Street casino is the wrong way forward, one that puts financial stability for all Americans at greatest risk.”
Bartlett Naylor, an advocate of financial policy at consumer group Public Citizen, echoed Merkley’s warning in a statement Thursday.
“This is no longer the Volcker Rule,” said Naylor. “In the hands of revolving door regulators, turn banks into Trump casinos. Will the inevitable bankruptcy of the Trump casino be too far away?”