Citigroup Regulator: Don't Blame Prop Trading

Citigroup was taking on a lot of risk. Too much risk. What does Dugan propose doing to prevent it from happening again?

"The super senior risk issue is being addressed by the supervisory community's adoption of better tools for stress testing and regulatory capital requirements that better reflect the risks associated with structured transactions," Mukri wrote in his email to me.

The key word here is "better." If the "tools for stress testing" really are better and the regulatory capital requirements really are better, we will be in good shape. Banks looking to load up on risk and juice their returns will no longer be able to do so by holding complex mortgage securities.

But, if Dugan and the big banks get their way, they will be able to do more proprietary trading. Apparently it didn't cause the last crisis, so it couldn't possibly cause the next one...right?

-- Written by Dan Freed in New York.

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