This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The 5 Dumbest Things on Wall Street: Oct. 14

3. Volcker Rule Ridiculousness

As it pertains to the so-called "Volcker Rule," we'll just borrow Supreme Court Justice Potter Stewart's famous line about pornography and say, 'We'll know a proprietary trade when we see it.'

Or maybe we won't. We have no idea.

Nevertheless, one thing we do know after thumbing through the 300-plus page monstrosity federal regulators released Tuesday is that the Goldman Sachs (GS - Get Report) legal team has undoubtedly already devised ways to hop through the loopholes in this ridiculous regulation so the bank's vaunted prop desks can continue to bet the house. Or bet somebody else's house. Or whatever vampire squids bet on these days.

Sadly, it was all supposed to be so simple. Respected on both sides of the aisle, former Fed chief Paul Volcker put forth the proposition that big financial companies be restricted from trading their own accounts, thereby eliminating an element of the moral hazards that led to the massive government bailouts at places like AIG (AIG - Get Report) and Bear Stearns.

But then the Treasury Department, Federal Reserve, Comptroller of the Currency and the FDIC took over and this committee turned this supposedly simple horse into one cock-eyed camel. Regulators have a mind-numbing 400 questions about the material and the comment period has been lengthened to accommodate all the parties seeking to skewer it to bits.

The majority of those questions will most certainly involve the trading "exemptions" from the Volcker Rule and what "short term" actually means. And it's this timing issue which will determine whether Wall Street's biggest banks will need to seriously restructure themselves and excise their profitable in-house casinos.

The authors of the rule kept the terminology vague when it comes to the duration of a trade, realizing that one firm's hedge is another bank's high frequency trade. Unfortunately, by wording the document so ambiguously, it becomes easier for a bank to argue that a trade is not in violation of the Volcker Rule, and harder for a regulator to contend that it is.

You know, it's kind of like when another famous government employee once said: "It depends upon what the meaning of the word 'is' is."

Boy, that guy really had a way with words.

3 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CLWR $0.00 0.00%
MX $7.17 12.21%
AAPL $130.28 -1.14%
AIG $58.61 -1.41%
GS $206.19 -1.10%

Markets

DOW 18,010.68 -115.44 -0.64%
S&P 500 2,107.39 -13.40 -0.63%
NASDAQ 5,070.0260 -27.95 -0.55%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs