By Greg Robb, MarketWatch
Reuters Enlarge Image
There would be no better use of President Donald Trump’s deregulatory zeal than to engineer a wholesale redesign of the crazy quilt of federal agencies that regulate Wall Street and the financial sector, former Fed Chairman Paul Volcker said Wednesday.
While everyone complains about the fragmented structure of regulatory agencies, there is enormous resistance to change, Volcker said in a speech to the Bretton Woods Committee meeting in Washington.
So far, some 50 efforts have been made since World War II to streamline the agencies but all have failed, he noted.
“My point here is to encourage the Congress and the new administration to launch together a serious study of how to deal with the shortcomings of a system which has simply outlived its rationale and its usefulness,” Volcker said.
“That indeed is a project worthy of a new administration interested not only in tweaking of oversight and regulatory procedures but rather in simplifying an archaic and unduly complicated regulatory system, a structure that is itself acting as an impediment to efficient and stable markets,” he said.
Volcker defended the eponymous rule that is part of the Dodd Frank law and specifically forbids banks protected by the federal safety net from speculative proprietary trading.
“Statistical evidence supports the view that the market functioning with respect to bid-ask pricing, market stability and so-called liquidity has not been appreciably changed from pre-crisis performance,” he said.
“Customers can be and are well served by today’s trading markets,” he added.
He noted wryly that five separate agencies had to write their own rules so the Volcker rule could be implemented. These agency interpretations “became a grist for the lobbying mills that populate the Washington swamp,” he said.
The former Fed chairman said he did not support calls for returning to a Glass Steagall-like law that separates commercial and investment banks. Volcker said he was worried that restoration of this Depression-era law might be an effort by brokerage firms to wiggle out of tough new regulations put in place since the financial crisis.