Regulatory Reform for Banks! Not a New Idea.
Former Federal Reserve Chairman Paul Volcker was back in the news last week as he warned that the financial system needs broad reform or else we run the risk of another financial crisis.
You may remember Volcker as the cigar-chomping Fed Chairman from 1979 to 1987 who raised interest rates dramatically to try and break the back of inflation in the early 1980s. He succeeded, but the price for success was a major recession.
During his speech last week to the Economic Club of New York, Volcker argued that the Federal Reserve should be a key player in overseeing the financial system and that they, “should have the power to dismantle big banks that pose a systemic risk to the economy,” according to CNNMoney.com.
Volcker worries that as the economy continues to heal, the urgency for reform will fade and that will set the stage for the next crisis. While we will likely get some type of financial reform in coming months, we hope that it will preserve the principles that have made our country so great. I for one think reinstating Glass Stegall (GSA) would do the trick. GSA was enacted during the depression to protect the country from rogue bankers. Clinton repealed it and look what we got. Seems like a pretty simple fix to me.
Ironically, on the day Volcker spoke, the S&P 500 index hit a fresh 52-week high, according to Briefing.com.