Market Overview

Is This Really Financial Reform For Banks (XLF)?


After almost 2 years of discussion, Congress is finally set to introduce a financial reform bill. The financial reform bill is supposed to prevent a taxpayer funded bailout for the big banks (XLF) from ever taking place again. If the bill passes in its current form, it will do very little to reform the banking industry.

According to Yahoo, “senate negotiators are expected to offer changes today to the financial reform bill that would soften the Volcker rule. On Capitol Hill there is widespread speculation that the Senate negotiators will propose language that would allow banks to invest a small amount of their capital in their internal hedge funds or proprietary trading desks."

There is currently a lot of debate about what amount of money banks will be allowed to put into hedge funds that they sponsor or operate prop trading desks. Bank lobbyists have been pushing for a level which would allow many of the nation’s largest banks to escape the Volcker rule altogether.

After a lot of debate about financial reform, it looks like the big banks are going to emerge from this reform bill relatively untouched.


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Posted-In: banking industry financial reformEconomics Markets