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Regulators ease Volcker Rule, on Mega Banks

serfserf Member Posts: 9,225 ✭✭✭✭
 So now they can go full hilt again which caused The 2007 banking crisis. And who is on the hook if derivatives trades go south ? Well The Taxpayer is. Even the FDIC is not even funded properly.

Sheila Bair, who chaired the FDIC for a five-year term that included the financial crisis, called the two changes “ill-advised.”

“As a former chair of the FDIC, it won’t surprise you to hear me say that that $40 billion dollars that will no longer be in banks to protect them against derivatives exposures” will likely increase risk to the government, Bair said Thursday on CNBC’s Squawk in the Street.


As unsecured creditors, depositors and bondholders are subordinated to derivative claims. Derivatives are the investments that banks make among each other, which are supposed to be used to hedge their portfolios. However, the 25 largest banks hold more than $247 trillion in derivatives, which poses a tremendous amount of risk to the financial system. To avoid a potential calamity, the Dodd-Frank Act gives preference to derivative claims.
The Volcker Rule is a federal regulation that generally prohibits banks from conducting certain investment activities with their own accounts and limits their dealings with hedge funds and private equity funds, also called covered funds. The Volcker Rule aims to protect bank customers by preventing banks from making certain types of speculative investments that contributed to the 2008 financial crisis.

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