Big Banks Have Already Figured Out The Loophole In Obama’s New Rules

[Robbien]

Big banks have already begun poking the holes in Obama’s new rules—holes they expect their banks to pass through basically unchanged.

The president promised this morning to work with Congress to ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.

But sources at three banks tell us that they are already finding ways to own, investment in and sponsor hedge funds and private equity funds. Even prop trading seems safe.

A person familiar with the operations of one big Wall Street bank said it expects that new regulation will affect less than 1% of its overall business.

The key phrase is “operations unrelated to serving customers.” The banks plan to claim that much of the business in which it engages is related in one way or another to serving customers. Even proprietary trading, for instance, can become related to customer service if it is done through internal hedge funds in which some outside clients are permitted to invest.

http://www.businessinsider.com/big-banks-have-already-figured-out-the-loophole-in-obamas-new-rules-2010-1


The legislation is worthless even before Congress gets ahold of it and make it more milquetoast.

[Nuclear Unicorn]

1. How about...

...a 75% tax on all hedge fund profits not paid out to customers as returns on indiviual savings?

That way the bank doesn't make money but they can use hedge fund payouts to attract customer deposits.

[Robbien]

2. No matter what is suggested

nothing real is ever going to be enacted.

Barney Frank already came out and said we should look at Obama's suggestion but any action should be taken slooowly. Perhaps in three years, perhaps five. Who knows. Let's put it on the back burner.