Banking Law

Spencer Bachus is expected to become chairman of the House Financial Services Committee in January, replacing one of our favorite punching bags, Barney Frank. If today's press reports are correct, and Rep. Bachus is serious about the perceived threat of US banks moving overseas solely because of the The Volcker Rule, then he's going to be as much a piece of low hanging fruit for mocking as was his predecessor.

?Depending on how U.S. regulators choose to implement it, the Volcker rule may spark a mass exodus of clients from U.S. banks to banks based abroad,? wrote Bachus, who offered an amendment during the legislative process that would have disabled the rule until other countries established similar regulation.

[...]

The ban on proprietary trading ?will hurt shareholders of the banks that have been forced by the Volcker rule to divest from profitable lines of business,? Bachus said in his letter to the council.

He noted that Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp. have taken steps to comply with the new law by shedding trading units. ?Shuttering these operations will cause these firms to be less profitable,? Bachus wrote.

Here's a news flash for Spence: Michael Lewis pointed out last week, in an article that received a lot of attention from those of us who actually follow the business of banking, the following:

The banks have no intention of ceasing their prop trading. They are merely disguising the activity, by giving it some other name.

Instead of trading "as principal" (which violates the law) they're finding ways to do it "as agent" for clients (which doesn't violate the law) and still make a boatload of cash for themselves. So, "Chairman-in-Waiting," read a newspaper and take a deep breath. Big Banks aren't heading out the door to Belize, Kabul, or Uranus. They're too busy finding loopholes in the Volcker Rule and driving Mack trucks through them.