While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse,” Obama said in announcing his proposals. He went on to tap into populist, anti-bank sentiment, noting the banks are making record profits while refusing to lend to small businesses, that they are charging high credit card rates and failing to “refund taxpayers for the bailout.” He added that it was “exactly this kind of irresponsibility that makes clear reform is necessary.
But would the latest proposals, including the “Volcker Rule” named for their champion, Paul A. Volcker — the former Federal Reserve chairman who is one of Obama’s chief economic advisors — really get at the causes of the recent financial crisis? The Volcker Rule, including the proprietary-trading restriction, has many high-profile supporters. But we at Blackhawk think it misses the mark by focusing attention on the now-blurred distinction between commercial banks, which take deposits, and investment banks, which trade on their own accounts and underwrite stock and bond issues.