Secret Signals and Sinister Signs

Congressional republicans are once again looking to eliminate the Volcker rule from Dodd-Frank, and they are reasonably sure it can pass because there is also support from democrats.

(Debbie Wasserman Schulz, for example, chair of the DNC and responsible for selection of superdelegates who–having more than one vote in the party’s primary system–will decide the party’s nominee for chief executive, is on record in support of weakening consumer credit protection.)

Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act is also known as the push-out rule. Section 619 is controversial because it intends to deconsolidate the risk.

(See other articles by griffithlighton on the push-out rule.)

President Obama appointed Volcker to be a member of the group working on economic recovery after his election in 08. Volcker said that best practices used to hedge risk actually caused it (the zero-hedge effect) in the name of reducing it.

Section 619 is Obama’s effort to end “too big to fail.” The CFTC issued rules requiring banks push out their proprietary-trade desks, which means they have to signal each other.

Price signaling is illegal. It is a secret, covert signal, and a sinister sign, because it is a form of market collusion, intending to avoid free-market mechanics, which naturally controls for risk in the alpha dimension (the risk dimension TBTF banking actually intends to hedge and leave YOU with no protection).

The push-out rule is really just a way to reinvent the problem. It appears to deconsolidate the risk without actually breaking up TBTF banks who are busy “making markets” by bundling debt (the credit risk) into a TBTF proportion.

You can’t really beat TBTF by being TBTF, which is why you should Vote For Bernie Sanders, anyway!

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About griffithlighton

musician-composer, artist, writer, philosopher and political economist (M.A.)
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