White House economic adviser Paul Volcker on Tuesday took to Congress his call to curb risky investing by big banks, warning that his soul would haunt lawmakers when the next banking crisis hits if they did not heed him now.
The 82-year-old former Federal Reserve chairman, whose star is rising in the administration of US President Barack Obama, faced questions about the White House’s latest and far-reaching proposals for a crackdown on the banking industry.
Obama stunned financial markets late last month by calling for new limits on banks’ ability to do proprietary trading, or buying and selling of investments for their own accounts unrelated to customers.
Volcker, considered a sage of monetary policy and a crusader for tighter regulation, conceded such a move would not have prevented the debacles at AIG and Lehman Brothers at the heart of the 2008 financial crisis.
ANOTHER CRISIS
However, he said not adopting trading limits would lead to another crisis in the future.
If proprietary trading is not curbed, Volcker told the Senate Banking Committee: “I may not live long enough to see the crisis, but my soul is going to come back and haunt you.”
Analysts have speculated about exactly what would be off-limits if Congress adds the proposal to a sweeping package of financial regulatory changes that is still being debated.
Some see a blurred line between proprietary trading and market-making that helps customers, but Volcker disagreed.
“Bankers know what proprietary trading is and is not. Don’t let them tell you any different ... I don’t think it’s so hard,” Volcker told lawmakers pressing for a clearer idea of where the regulatory lines would be drawn.
Treasury Deputy Secretary Neal Wolin, who testified alongside Volcker at the hearing, provided few new details.
Under the Obama proposals, banks could not establish or maintain a separate trading desk, capitalized with their own resources and unrelated to customer business, Wolin said.
That could mean barring banks from using such trading desks to speculate on the prices of oil, gas or equity securities, he said, adding that the restrictions should apply to all banks, including US operations of foreign banking firms.
Senator Christopher Dodd, the Democratic chairman of the committee, said he strongly supports Obama’s proposals.
‘QUITE DISTURBED’
Senator Richard Shelby, the panel’s top Republican, said he was “quite disturbed” by Obama’s proposals being “air dropped” into the financial regulation debate, which is more than a year old, but said he was willing to consider them.
Senator Bob Corker, another Republican, questioned the need to crack down on proprietary trading at commercial banks, saying that firewalls already exist within bank holding companies to protect deposit-based activities.
Despite the firewalls, Wolin said, banks that do proprietary trading enjoy a cheaper cost of capital because of the taxpayer backing of the deposit-funded sides of their business models, which he said is unfair and should end.
A second hearing was set for today to hear from executives of JPMorgan and Goldman Sachs.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS