Volcker to Regulators: Where Are the Regulations?

by: The Fundamental Analyst

Paul Volcker has had enough of not being listened to by the Obama Whitehouse and set off on a whirlwind global tour to voice his concerns. His comments are a direct slap in the face for the administration that appointed him. While Obama’s pathetic chiding of bankers in recent days was little more than a PR stunt, Volcker actually has something of substance to say. From Bloomberg:

Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail

Paul A. Volcker visited nine cities in five countries in the past eight weeks to warn that bankers and regulators “have not come anywhere close to responding with necessary vigor” to the worst economic crisis in 70 years.

“There is a lot of evidence that financial weaknesses brought us to the brink of a great depression,” Volcker, 82, said Dec. 8. at a conference in West Sussex, England. He told executives there that the changes they’ve proposed are “like a dimple.”

Unlike Obama, Volcker is not speaking from a teleprompter, he’s speaking from years of experience. As the nation's top regulator, Volcker knew how to take the punchbowl away at the appropriate time, a concept alien to the likes of Geithner, Summers and Bernanke. Volcker’s approach is very simple: he wants to lower the risk of the financial system, he understands the economy has become over-financialized and he wants smaller institutions with tighter oversight.

Volcker has also lashed out at the idea of financial innovation having being quoted recently as saying:

I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence.

He went on to say that the biggest innovation in the last 20 years has been the ATM. Again, Volcker peels back the charade of talking points made by the banks and their lobbyists. It doesn’t take much to prove Volcker’s point, just add up the cumulative profits from the banking industry and subtract the losses. Just performing that calculation shows what a recent BBC article pointed out, that cleaners are worth more to society than bankers.

Unfortunately Volcker is a lone voice in the Whitehouse administration that has clearly wasted an opportunity to come down hard on the financial industry. I wonder how long it will be until Volcker gets censured by the emasculated financial industry lackey team of Summers, Geithner and Bernanke?

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