Where the Money Is: March 26

Join Motley Fool banking analyst David Hanson and Matt Koppenheffer as they discuss how executive compensation influences their investing decisions, the benefit of being too big to fail, and take a question from their mailbag about Bank of Internet.

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  • Report this Comment On March 26, 2014, at 7:49 PM, teakbay wrote:

    Matt, I think your view of big banks and oversight is naive. The rules are like marshmallows and the big banks know it. Back in 2004 the Office of Comptroller of the Currency (OCC) exempted nationally-chartered banks from state laws so less eyes on the issues. Recently in a Bloomberg Business week article it said ‘The Volcker Rule Doesn’t have Teeth’ . Under the Volcker Rule, banks that help companies issue stocks and bonds can still hold some of those securities temporarily as part of the underwriting process. Banks are also allowed to make markets—that is, stand ready to buy when their clients are selling, and sell when they’re buying. A bank can quietly accumulate shares in, say, IBM (IBM) to meet “the reasonably expected near-term demands of clients.” Critics argue the rule will still crimp market-making. René Stulz, a professor of banking and monetary economics at Ohio State University’s Fisher College of Business, says a reduction in the number of deep-pocketed players willing to buy and sell in financial markets “could ultimately make the banks riskier rather than safer.”

    Since five agencies are in charge of compliance, multiple regulators could target the same activity in a single firm in different ways. Blurry lines are seen in the regulations which the only people who seem truly happy with the final product are lawyers, it is said Jones Day alone had 200 attorneys around the world reviewing the rule. Big Banks are still to big to fail period and we may see another bust of the market.

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Matt Koppenheffer

Matt is the Managing Director of The Motley Fool GmbH, The Fool's German business. Besuch uns bei!

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