With Goldman Alums in the Trump White House, The Investment Banking Giant Sees Window to Gut Obama-Era Volcker Rule
WASHINGTON, D.C. – In case you missed it, yesterday The Financial Times published a story detailing how Goldman Sachs alumni including Treasury Secretary Steve Mnuchin and National Economic Council Director Gary Cohn are advancing policies that will benefit their former employer’s risky behavior and could one day tank the economy – again.
At the top of Goldman’s list is gutting the Volcker Rule that curtails risky behavior at investment banks.
From the Financial Times story:
“If the Obama years were a harsh time for Goldman in Washington, the election of Donald Trump has provided a new opening. Not only does the president regularly rail against ‘job-killing regulations’, he has made two Goldman alumni his point men on financial regulation. Gary Cohn, Mr. Blankfein’s former deputy, heads the national economic council, while Steven Mnuchin, once its chief information officer, is Treasury secretary.”
The Financial Times reports that increased clout in the Trump administration provides high-level government allies in Goldman’s mission to have the Volcker Rule “watered down, if not abolished.”
“The bank is ‘all over it’, says a Treasury official. ‘Their single focus this year, more than any other bank, is the Volcker rule,’ says the Washington chief of a rival institution. Dennis Kelleher of Better Markets, which advocates tougher regulation, says: ‘Goldman has always been the big swashbuckling trader that wants to take huge risks and huge leverage for the big score.’
[ …. ]
“When Mr. Trump fired the gun on Wall Street deregulation this year Mr. Cohn said ‘we’re not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year’. In June, Mr. Mnuchin’s Treasury department unveiled a regulatory review whose bank-friendly recommendations included ‘substantial amendment’ to the Volcker rule. Randal Quarles, Mr. Trump’s nominee to be the Fed’s regulatory chief, said last month that ‘the complexity of the rule makes it very difficult to apply and [we] should work to try to simplify [it]’.”
[ …. ]
“Only Congress could repeal the Volcker rule, and that is politically improbable. But there is a backdoor route for lawmakers to help Goldman. It would entail slipping Dodd-Frank changes into an end-of-year spending bill. Two people close to Goldman say it is evaluating its options. ‘We have our Christmas wishlist, but what can you actually get for the kids under the tree?’ says one.
“Mr. Mnuchin and Mr. Cohn have hinted at changes that would exempt investment banks from some Dodd-Frank restrictions. In January, Mr. Mnuchin told senators: ‘I think the concept of proprietary trading does not belong in banks with [federal] insurance.’ The Volcker rule applies to all banks. Narrowing it to only the parts with government-insured deposits would liberate Goldman, because unlike its rivals it keeps its trading separate from its small consumer bank.”
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