There’s been considerable buzz surrounding the Volcker Rule this week, as the commenting deadline for the law ended this Monday.The rule, which bans proprietary trading at bank-holding companies, is arguably the most controversial aspect of the Dodd-Frank reforms, and a plethora of voices of support and disapproval have sounded in the sphere of public opinion so far this week.
This morning, former Treasury Secretary Hank Paulson gave his own thoughts on the Volcker Rule on an interview with CNBC. Paulson said although he favoured regulation, he did not believe that proprietary trading caused the financial crisis and that regulators should be focusing on acts other than prop trading to mitigate risk.
He listed three things that he thought were just as risky as prop trading:
A prop trade clearly brings with it risks, but there are many practices that do. And from my experience, banks get in trouble even more from customer accommodating trades, bridge loans or stepping in to do a big oil-hedging transaction or whatever. So I think it can be counterproductive to single out one area.”
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