ipl-logo

Arguments Against The Volcker Rule

686 Words3 Pages

3.3 Volcker Rule
Volcker Rule is a regulatory response which goal is to limit the US commercial banks in trading on their own accounts. The argument is that this limit will help the banks to avoid conflicts of interest while at the same time it will reduce the risk in the banking system. (Law, 2014; “The Fed - Volcker Rule,” n.d.)
However, there are those who are sceptical and critical about the Volcker Rule. First of all, they argue that the Rule tries to eliminate the investment risk in banks while at the same time it does not measure the level of risk or the ability of banks to control it. That would give us an idea on whether the risk is excessive or not. Instead, the main focus of the Rule is the aim of the investment. But, this means that the Volcker Rule will struggle to detect or eliminate any excessive risk. Furthermore, even when it …show more content…

Neil Irwin offers a great example of that. He says that in a supposed scenario that the regulator sees that a bank holds millions of dollars' worth of option that a different currency, will fall relative to dollar. The regulator will think that the bank is speculating that the different currency will fall against the dollar, an action that is prohibited by the Volcker Rule. But the bank holds that options as a security, due to a loan that gave to a foreign company. So, all it does, is to reduce the risk as much as possible. (“Everything you need to know about the Volcker Rule - The Washington Post,” n.d.) The reaction of the Rule to that is to force the banks to provide the regulators with the information about which risks the banks are hedging. But, this would create a vast amount of paperwork for a commercial bank that wants to have an internal hedge fund as well. (“The biggest problem with the Volcker rule - The Washington Post,”

Show More
Related

Federal Reserve Act Dbq

554 Words | 3 Pages

This act was created in hope of establishing a form of economic stability establishing the Central Bank. The Federal Reserve Act has been identified as one of the most influential laws in relation to the United State’s financial system. This act called for eight to twelve regional Reserve Banks that would be owned by commercial banks and their actions would be monitored by the President. Once that was accomplished, the Federal Reserve System would become a privately owned banking system that would be ran by the public. Bankers would run the bank, but the Federal Reserve Board would monitor their actions to make sure everything went smoothly.

Read More

The Volcker Rule Under Section 619 Of The Dodd-Frank Act

976 Words | 4 Pages

The Volcker Rule is a federal regulation that prohibits banks from conducting certain investment activities with their own accounts, and limits their ownership of and relationship with hedge funds and private equity funds, also called covered funds. The Volcker Rule’s purpose is to prevent banks from making certain types of speculative investments that contributed to the 2008 financial crisis (Volcker Rule Definition | Investopedia). It was proposed by the economist Paul Volcker. It came about in response to the crash of the financial markets in 2008. It is a part of the Dodd-Frank Act.

Read More

How Does Andrew Jackson Deserve To Be On US Currency

1639 Words | 7 Pages

This is bad for the national economy as stated in the previous reasoning from Jackson’s veto letter due to their selfish mindsets. This is relevant because it illustrates how the bank is in danger and Jackson had to veto it to protect the economy. This shows

Read More

The Glass-Steagall Banking Reform Act Of 1933

974 Words | 4 Pages

In the peak of the Great Depression, millions of Americans lost all of their money due to bank runs that used up all of the money in the reserves. Prior to the Depression, there was nothing to insure that your money was truly protected in your bank account. The provision to create an organization that insures all deposits in national banks kept our economy stable. Frontrunner of the Act, Henry Steagall, was insistent upon putting the provision into the act despite its controversial nature. Steagall advocated for this provision with small, rural banks in mind but was opposed by large banks because they believed that they would “end up subsidizing small banks” (Maues).

Read More

Dodd Frank Act Essay

2826 Words | 12 Pages

The Dodd-Frank Act led to the creation of the Consumer Financial Protection Bureau, which is set to protect consumers from financial misconduct. Although this Act seems like an aid, some say that these sorts of agencies can lure the industries, and can lead to creating regulatory policies that are in favor of the industry and markets, not the consumers. To add on, another theory is that institutions may join in with greater risks when they aren’t held up to the consequences of their actions. To counter this, the Dodd-Frank Act designated to overlook certain financial institutions that are “systematically important” and hence get more enhanced regulations overlooking them, as a way to prevent any other occurrences or high-level risk investments that can fail. You can argue that the regulations could push for more risky behavior from the institutions as it can act like a safety net that can rebounce the failures with the help of the

Read More

Alexander Hamilton's Transportation Revolution

1568 Words | 7 Pages

This act enables creditors to gain power and it gives large-scale entrepreneurs an advantage in competing for investment capital. One major weakness of the system is that it restricts beginning entrepreneurs entry into markets because the banks need reserves, which prevents long-term

Read More

Why Was The Federal Reserve Formed?

1005 Words | 5 Pages

As one bank failed people not even using that bank saw the panic and would withdraw their deposits even when a bank was not in any danger of failing. Because of the widespread panics that were driving banks out of business banks needed an emergency reserve so in times of panic they would have the supply to keep up with the demand of the withdrawals. Due to the severe panic in 1907, that wreaked havoc on the banking systems, it led to Congress creating the federal reserve act. The federal reserve regulates banks and makes emergency loans if they ever run short of money so there would be fewer panics. The federal reserve is known as the lender of last resort in times of crisis.

Read More

New Deal Dbq

786 Words | 4 Pages

FDR came up with a plan to put faith back into the banking system as well as insure the customer’s money was going to be their when they needed it. This program was called the FDIC “President Roosevelt signs this act on June 16, 1933, to raise the confidence of the U.S. public in the banking system by alleviating the disruptions caused by bank failures and bank runs. From 1929 to 1933, bank failures resulted in losses to depositors of about $1.3 billion. Before the FDIC was in operation, large-scale cash demands of fearful depositors often struck the fatal blow to banks that might otherwise have survived. Since the FDIC went into operation, bank runs no longer constitute a threat to the banking industry.”

Read More

Pros And Cons Of Federal Expository Insurance

1460 Words | 6 Pages

2. Restrictions on which depository institutions are eligible for government-sponsored depository insurance; be sure to address foreign banks in this discussion Depository insurance is an insurance measure that is implemented so as to protect the depositors of a financial institution in full or in part from the losses occasioned by the financial institutions inability to pay its debt when they are due. Depository insurance exists because of the allowance that banks have to invest the money that is deposited with them and there is generally the risk that borrowers may fail to pay the money loaned to them. The deposits can also be withdrawn from the banks with little or no notice which may result in bank runs where there is a threat of insolvency. The Federal Deposit Insurance Corporation is the body that is tasked

Read More

Arguments Against The Exclusionary Rule

513 Words | 3 Pages

The exclusionary rule is a deterrent against searches and seizures. Any evidence that is gained through an illegal search or seizure is now inadmissible in criminal proceedings, per the exclusionary rule. Supporters of the exclusionary rule argue that it helps prevent illegal searches and seizures against law enforcement. Those against the exclusionary rule argue that the exclusionary rule keeps criminals out of jail and there are other preventative measures such as suspending police officers without pay, dismissing them from a case, or in extreme circumstances terminating employment of officers who violate the Fourth Amendment. The Fourth Amendment of the Constitution protects all citizens from unreasonable searches and seizures from all government officials.

Read More

Arguments Against The Exclusionary Rule

676 Words | 3 Pages

The exclusionary rule, as applied today, states that any evidence that was found using an unconstitutional method is also unconstitutional; therefore, inadmissible in court. This is because criminal proceedings are to be fair and impartial (i.e. “reason and truth”). I agree, by allowing the exclusionary rule into proceedings, the rights of the defendants are protected. Although the defendants may be guilty, there has to be a system in which the police should also be held accountable for the way they proceed in practice. The criminal proceeding is adversarial with the ultimate goal for both sides being to let the evidence and circumstances prove the truth; therefore, the way the evidence is gather should be a critical element towards a conviction.

Read More

Arguments Against The Exclusionary Rule

493 Words | 2 Pages

The exclusionary rule is a lawful principle that the United States use, which expresses that the confirmation that was powerfully utilized by the police can 't be utilized in a criminal trial. The motivation behind why this is done it’s for the security of the established rights. In addition, the exclusionary rule states that in the Fifth Amendment no one "should be denied of life, freedom, or property without due procedure of law." The exclusionary rule additionally expresses that in the Fourth Amendment it is intended to shield residents from unlawful pursuits and seizures. It also applies to the infringement of the Sixth Amendment, which ensures the privilege to counsel.

Read More

Arguments Against The Exclusionary Rule

1034 Words | 5 Pages

In the United States, there are many times in which police officers conduct illegal searched and seizures, in hopes of finding evidence that will get an accused a conviction. Under the Fourth Amendment, individuals have a right to be protected from such situations. In 1957, there was a case in which police received a tip from an informant in regard to a bombing and the suspect responsible for the recent bombings (Peak, K. & Everett, P., 2016). The police went to the woman's home and forced themselves in to obtain any evidence that they could find. Evidence was found at the home and the woman was later convicted.

Read More

Advantages Of Risk Metrics

919 Words | 4 Pages

That being said, it does not satisfy a common risk principle that the aggregation of two risks should be less risky than each risk taken separately. The advantage of VaR is to measure risk over a very short

Read More

Single Index Model And Capital Asset Pricing Model

1129 Words | 5 Pages

Diminishing of risk towards zero is as a result of diversification, which can reduce firm-specific risk. Diversification does not however reduce market risk, to

Read More

More about Arguments Against The Volcker Rule

Related Topics

Open Document