The Dodd-Frank legislation of 2010 supposedly was enacted, among its hodge-podge of intentions, to prevent big banks from failing. To do so, it helped impose rules on banks, against trading for their own accounts; so-called Volcker Rules, after Paul Volcker, a former Chairman of the Federal Reserve.
The Glass-Steagall Act, preventing commercial banks from being in the investment banking business, had been around under the Banking Act of 1934 until it was terminated during the Clinton administration.
A similar law could probably have been passed, without all the talk that casts gloom over industry and finance and sees to it that we remain in a deep recession. Right now, commercial banks are spinning off trading activities for their own accounts but it’s difficult to distinguish activities done on behalf of clients.
The upshot? Confusion and bigger banks than ever because Dodd-Frank is murder on smaller banks. The bigger than ever banks will continue to be too big to fail.
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