Consider the Source: "Research for Hire" on the Volcker Rule

This week Congress reviewed the Volcker Rule provisions of the Dodd-Frank Act which would limit proprietary trading by the largest banks.  The House Financial Services Committee Subcommittees on Capital Markets and Government Sponsored Enterprises and Financial Institutions and Consumer Credit Joint Hearing focused on “Examining the Impact of the Volcker Rule on Markets, Businesses, Investors and Job Creation.”  

In the New York Times "Economix" section, Simon Johnson points out that the Oliver Wyman report prepared for Securities Industry and Financial Markets Association (SIFMA), presenting negative impact which could flow from implementation of the Volcker Rule, is prepared according to SIFMA's engagement requirements and adheres to "form expressly required thereby."  Let's review the SIFMA's big bank members:  Barclays Capital, Morgan Stanley, Société Générale, UBS, BNP Paribas, HSBC, Deutsche Bank, Goldman Sachs, Citigroup, Royal Bank of Scotland, JPMorgan Chase, Credit Suisse, Royal Bank of Canada and Merrill Lynch -- all of which would be required to divest their proprietary trading activities under the Volcker Rule.  

As with all Congressional testimony, we should fully take account of a study's funders, its assumptions, and its biases rather than blindly giving it full credence as "expert" analysis. 

With respect to the Volcker Rule, let's also not forget that the purpose is to restrict "Too Big to Fail" banking entities from "innovating" us into another financial crisis -- and government bailout.  That should be in all of our interests. 

 LInk:  http://economix.blogs.nytimes.com/2012/01/19/should-we-trust-paid-experts-on-the-volcker-rule/

LInk to House Financial Services Committee Hearings:  http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=274322

LInk to SIFMA Study:  http://financialservices.house.gov/UploadedFiles/HHRG-112-BA-WState-SIFMA-20120118.pdf  

(ag) Jan. 21, 2012, in Too Big to Fail, Dodd-Frank, Volcker Rule, Congress