Comments (13)

May 19, 2010

Care to explain?

May 19, 2010

Everything I've read seems to imply the opposite. Check this article from Reuters:

http://www.reuters.com/article/idUSTRE64H6EH201005...
"The chances of it getting fully removed are probably down to zero by now," said one lobbyist who spoke on condition of anonymity because of the delicacy of Senate negotiations."

May 19, 2010

http://www.reuters.com/article/idUSN1817669820100518
institutions not doing "traditional banking" are now excluded from Volcker Rule. Though I'm not sure what people consider "traditional banking" these days. Maybe this would mean places like JPMorganChase and BoAML further distancing themselves from their retail business. and maybe even some distancing (somehow) between corporate banking and capital markets? comments?

May 19, 2010

Senator Shelby blocked it from even being discussed...lol dems got pw3nd

May 19, 2010
RedHill:

Senator Shelby blocked it from even being discussed...lol dems got pw3nd

Amen for some common sense.

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May 19, 2010

Ummm, I hate to say it, but Glass-Steagall worked pretty well for the 60 years it was in existence. I think the only difference between us and the bankers of the '20s and '30s was that the bankers of the '20s and '30s were willing to admit the truth even if it set them back a little temporarily.

The Volcker Rule will help prevent future economic meltdowns and save us from going back to 1970s-style regulation in five years after there is another panic. If you think the Volcker Rule is bad, just think about what life was like when there were only two legal kinds of home mortgages, bank deposit rates were capped below inflation, and checking accounts weren't even allowed to bear interest. When a merger making up 6% of the market share of the entire industry took seven years to get past the FTC. When bankers, traders, and speculators were evil people not to be trusted rather than folks who helped the economy run more efficiently.

May 19, 2010

So what you're saying is that by Volcker's proposal failing, you're ok with Goldman / Morgan / JP gambling with low interest tax payer funds as opposed to having these funneled to back your deposits or maybe back into the system to places like NY where people are now faced with higher property taxes or lower school funding?

I guess I'm failing to really understand how you can be ok with Goldman, the holding company, using cheap funds from the fed's window to support their prop trading... sure they can sustain not one day of losses in a quarter, have maximum upside with the cheap leverage, but at the end of the day, should things go wrong, idiot taxpayers like you and I foot the bill.

No offense, unless you're some multi-millionaire executive at a large bank benefiting from the system, from the fed's window, benefiting from great quarterly returns (translate, huge bonuses) then you've just been brainwashed into thinking that the glass steagall act was bad and what Volcker is proposing is evil.

His basic principle is that these banks should no longer house so many conflicting operations and accumulate such massive amounts of capital, concentrated capital that poses a systematic risk...

Glass-Steagall ensured my money was at least protected from prop trading and loaned out to businesses or mortgages, today, I don't even know where my deposit is being funneled too, how much risk the bank I've entrusted with it is accumulating and by default, putting my deposit in jeopardy (anything past 100k, at least)...

May 19, 2010

STFU with this tax payer funds bull shit every hear of the phrase don't ask what this country can do for you but what you can do for the banks

May 19, 2010

MezzKet:

As a someone who works on a proprietary trading desk in one of the banks that you mentioned above - it is very frustrating when we are assumed by the public and people like you to be "gambling" with low interest tax payer funds.

If you don't understand what I am about to say perhaps you should consider taking some basic finance classes and think prior to posting completely inaccurate information.

The cost of carry of a proprietary position is nowhere near the the fed funds rate. Depending on the duration and asset class, our funding is more like swaps + [bank] cds spreads, which is roughly means L + 150 - 250 bps.

Any of the above banks have a very high return on equity. For example, if the return on equity for a bank is 20% (ie Goldman), there is no point in investing in treasuries at 5%. It is a waste of valuable balance sheet. It is hard to find 20% returns by going short so assume that we are long and to the exent we short we are shorting to hedge only. And I will mention that I am talking about return on equity so forget about leverage.

This leads to the conclusion that our proprietary "bets" provide capital. The Volker Rule is in direct conflict with this objective of the Government, which is to stimulate lending and provide capital to those homeowners, small businesses, and corporations that need it.

Finally, proprietary bets did not bring down banks like bear and Lehman. I need not explain this point further.

If your wish is to impliment the Volker Rule I cannot change your mind. I will lose my job, which is fine, but I guarantee the net costs far outweigh any benefits that you might think of.

May 19, 2010
sfrc1:

MezzKet:

As a someone who works on a proprietary trading desk in one of the banks that you mentioned above - it is very frustrating when we are assumed by the public and people like you to be "gambling" with low interest tax payer funds.

If you don't understand what I am about to say perhaps you should consider taking some basic finance classes and think prior to posting completely inaccurate information.

The cost of carry of a proprietary position is nowhere near the the fed funds rate. Depending on the duration and asset class, our funding is more like swaps + [bank] cds spreads, which is roughly means L + 150 - 250 bps.

Any of the above banks have a very high return on equity. For example, if the return on equity for a bank is 20% (ie Goldman), there is no point in investing in treasuries at 5%. It is a waste of valuable balance sheet. It is hard to find 20% returns by going short so assume that we are long and to the exent we short we are shorting to hedge only. And I will mention that I am talking about return on equity so forget about leverage.

This leads to the conclusion that our proprietary "bets" provide capital. The Volker Rule is in direct conflict with this objective of the Government, which is to stimulate lending and provide capital to those homeowners, small businesses, and corporations that need it.

Finally, proprietary bets did not bring down banks like bear and Lehman. I need not explain this point further.

If your wish is to impliment the Volker Rule I cannot change your mind. I will lose my job, which is fine, but I guarantee the net costs far outweigh any benefits that you might think of.

Very eloquently put. Silver banana for you.

May 20, 2010
sfrc1:

MezzKet:

As a someone who works on a proprietary trading desk in one of the banks that you mentioned above - it is very frustrating when we are assumed by the public and people like you to be "gambling" with low interest tax payer funds.

If you don't understand what I am about to say perhaps you should consider taking some basic finance classes and think prior to posting completely inaccurate information.

The cost of carry of a proprietary position is nowhere near the the fed funds rate. Depending on the duration and asset class, our funding is more like swaps + [bank] cds spreads, which is roughly means L + 150 - 250 bps.

Any of the above banks have a very high return on equity. For example, if the return on equity for a bank is 20% (ie Goldman), there is no point in investing in treasuries at 5%. It is a waste of valuable balance sheet. It is hard to find 20% returns by going short so assume that we are long and to the exent we short we are shorting to hedge only. And I will mention that I am talking about return on equity so forget about leverage.

This leads to the conclusion that our proprietary "bets" provide capital. The Volker Rule is in direct conflict with this objective of the Government, which is to stimulate lending and provide capital to those homeowners, small businesses, and corporations that need it.

Finally, proprietary bets did not bring down banks like bear and Lehman. I need not explain this point further.

If your wish is to impliment the Volker Rule I cannot change your mind. I will lose my job, which is fine, but I guarantee the net costs far outweigh any benefits that you might think of.

Erm I agree with some of what you wrote (especially with regards to the media's obsession with the carry trade) but how exactly does targeting return on equity preclude leverage? Quite the opposite, the reason the major securities firms were able to achieve such high ROEs in the Naughty Noughties was because they were levered up to their eyeballs.

My personal feeling is that regardless of the whys and wherefores of the banking collapse, banks should be able to either perform retail and investment banking services for clients, or act as a principal. This is not necessarily because of the systemic risks involved but because the two are incompatible in my opinion, Chinese walls or not. And I-banks should most definitely NOT have access to the Fed discount window except in exceptional circumstances (i.e. I think the Fed made the right call at the height of the GFC to allow the securities firms to convert to banks but there is no reason why MS, GS etc should still have access to it).

May 20, 2010
sfrc1:

MezzKet:

As a someone who works on a proprietary trading desk in one of the banks that you mentioned above - it is very frustrating when we are assumed by the public and people like you to be "gambling" with low interest tax payer funds.

We're pretty sure you're not, but the fact is that a bank could try to pull it off. The Volcker Rule basically puts a sheet of bulletproof glass between proprietary trading operations and the rest of the economy so the proprietary trading operations can't hold them hostage.

The cost of carry of a proprietary position is nowhere near the the fed funds rate. Depending on the duration and asset class, our funding is more like swaps + [bank] cds spreads, which is roughly means L + 150 - 250 bps.

Hmmm, I figured they'd be charging you guys the preferred cds rate rather than the senior no-Re rate I think you're implying here. In any case, the reason your firm's cds rates are 150-250 bps is the fact that there's an assumption that the feds will bail you out in a market panic- otherwise, your spread would be closer to 400-500 bps. So you're still getting pretty cheap funding. At Fidelity, my margin rate is 7% on up to 50% leverage; you're paying 3% on 80%+ leverage.

If your wish is to impliment the Volker Rule I cannot change your mind. I will lose my job, which is fine, but I guarantee the net costs far outweigh any benefits that you might think of.

Do you honestly believe that? You honestly think that rather than spin off a valuable trading operation, they will simply fire you and just throw away hundreds of millions of dollars of value? You honestly think that if you can't get cheap funding from banks, you'll be out of business?

Yes, there will be some costs. The economy will get a little less efficient in the long run, and we'll give up maybe 0.2% of GDP growth. But it's a small price to pay for mitigating financial panics. Essentially, we're reducing the beta of the economy, but if the average investor knew what beta was, he would tell you that it needed to come down significantly.

May 20, 2010
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