This is Mark Vickery covering for Sheraz Mian, who will be away on business until later this week.
Never mind Janet Yellen right now — Treasury Secretary from at least a generation ago Paul Volcker is now front and center in business news this week. The reason? Apparently, he’s considered by some to have the best system for regulating the finance industry going forward. I’m sure it helps his position that he’s an advisor of President Obama.
While the “too big to fail” banks like JPMorgan (JPM), Goldman Sachs (GS) and Bank of America (BAC) are busy settling lawsuits regarding various mismanagement of funds largely having to do with the mortgage crisis that collapsed the U.S. economy 5 years ago, five federal agencies are reportedly planning to approve a strict version of the Volcker Rule next week. The plan includes trading bans for banks and limiting their hedge fund investment capabilities.
A decade ago, no one talked about tail risk hedge funds, which were a minuscule niche of the market. However, today many large investors, including pension funds and other institutions, have mandates that require the inclusion of tail risk protection. In a recent interview with ValueWalk, Kris Sidial of tail risk fund Ambrus Group, a Read More
Next week, these five commissions — including the SEC and others you likely have never heard of unless you’re a banker — have announced they will vote on the Volcker Rule, meaning it stands a good chance of passing. The Volcker Rule was actually included in the larger Dodd-Frank legislation of a few years ago, and the Volcker Rule itself is supposedly close to 1000 pages long.
So while free-marketers will lament and wring their hands over what restricting banks from taking investment risks will do to our economy, it’s still possible to look at this event as possible good news, even if you hate the policy: knowing what the damage is going to be, and planning accordingly because of it, is better than not knowing. More unfinished business before calendar 2013 comes to a close.
Zacks Director of Research Sheraz Mian will be back this week. He’ll likely find more interesting things to discuss, and in a more insightful way, so please don’t despair.