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Volcker Loves Volcker Rule

Got to give it up for Volcker, who, despite growing uproar against his proposed eponymous rule, is soldiering on, saying it's the best thing that ever happened since well, ever. Volcker is however getting increasingly frustrated and said he is "very disturbed" by the level of dysfunction in Capitol Hill and the Senate, and basically, WTF is going on with these people who can't get things done?
In a CNN interview yesterday, Volcker said that regulators screw up big time in the years leading to the crisis, as a) they weren't "on top" of anything and b) they didn't understand what was going on anyway, relying on "somebody down in the bowels had it under control." Also financial innovation sucks. The only innovation that has added value recently, is the ATM machine.

It wasn't just the Federal Reserve. And unfortunately, you know, when this was all going up, where was the SEC? And you ask, where was the Federal Reserve? Where was the comptroller of the currency?

As for his rule, Volcker reiterated his "euthanasia" principle: "If a big, non-bank institution gets in trouble and threatens the whole system, there ought to be some authority that can step in, take over that organization and liquidate it or merge it -- not save it. It's what I call euthanasia, not a rescue.
They shouldn't be doing so-called "proprietary" activity, where they're off there trading for their own interest. They're trading to make money. And you get very aggressive traders, and they're out there. Millions of dollars are at stake, and personal bonuses, so they have a real incentive to take risks, which is fine, if you're not being protected by the government."


The Volcker Rule Will Come Too Late For Kaufman Bros.

If you're a more or less regular consumer of efficient markets hypothesis Kool-Aid then a fun activity is to handicap the probability of various public policy things based on market reaction.* So for instance Obama's budget is going to reduce the tax deductibility of munis! And the muni market didn't care! So, no, Obama is not going to reduce the tax deductibility of munis. You heard it here first, or last, or whatever. (Exercise for the reader: is Obama going to raise the tax rate on dividends?) Since today seems to be Volcker Day hangover it's worth pondering this: