So a few days after Dodd-Frank became law I posited that the so-called Volcker Rule would do little to solve excessive speculation by banks subsidized by the federal government through deposit insurance, or otherwise. Here is what I said then.
Yesterday, the Fed released its final rules on the Volcker Rule. Compare their release with my summary from 2010, here.
The bottom line is that megabanks may still engage in all kinds of speculative activities. Here is the money quote from the Fed: "Like the Dodd-Frank Act, the final rules provide exemptions for certain activities, including market making, underwriting, hedging, trading in government obligations, insurance company activities, and organizing and offering hedge funds or private equity funds. The final rules also clarify that certain activities are not prohibited, including acting as agent, broker, or custodian." In other words the megabanks can be investment banks with government backing.
The rules take effect July 21, 2015. This can be extended by the Fed.
Frankly, I cannot see how these rules change anything. More to come. . .