Casual visitors might get the idea that this blog is anti-governmental regulations. That is really not the case, but we are fervent believers in The Law of Unintended Consequences, and we are afraid that many well-meaning governmental actions create more unanticipated problems than they solve. Big City banking confuses us. We like to think we're kind of smart, so we suspect Big City banking confuses the regulators as well. Vernon Vogelsong has weighed in on the subject - here. Excerpt here:
The Volcker Rule has been a public battleground for opponents and proponents of financial reform, but for the wrong reasons. It’s exciting to talk about personalities like the London Whale or Kweku Adoboli who made large directional commitments and lost big. It’s also provocative to imagine that a cabal of adrenaline junkies is causing the world economy to teeter on the brink of disaster. In truth, the real problems are much more entrenched and far quieter. It is politically popular and frequently financially profitable to extend credit. We lost control of the incentives that would ensure prudent loan origination, and we had insufficient limits on leverage.