A new version of the Volcker Rule — which is more of list of rules on Wall Street trading — was just approved, and it’s going to hit bankers where it hurts most: their wallets.
Traditionally on Wall Street, if you make a big risky bet and come out on top, your employer (JP Morgan, Goldman Sachs, Bank of America) makes dollars rain all over you.
For you, it’s a good thing. But the caveat here, of course, is winning. You have to win or you could end up losing $6 billion on a single trade, or something like that.
This is not something Wall Streeters like to think about, though. Risk is a time-honored tradition in the business.
As of just a few moments ago, though, The Volcker Rule is set to change all of that.
Regulators have been meeting to finalise tougher post-financial crisis rules on how Wall Street banks can trade with their own money, and it looks like one of those rules will be that Wall Street banks cannot have compensation arrangements that reward it. Period.
That goes for foreign banks operating in the U.S. too.
This is a big victory for advocates of more regulation on Wall Street, and they’re already crowing about it on Twitter.
Check out this tweet from Oregon Senator Jeff Merkley:
It’s looking like we will have a real Volcker Rule. Looking forward to reviewing final text.
— Senator Jeff Merkley (@SenJeffMerkley) December 9, 2013
Don’t expect banks to take this lying down. Their last ditch lobby effort is still in full swing, so this may not be over yet.
But it looks kind of over.
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