A key bank rule written in the wake of the financial crisis just got rolled back

A key bank rule written in the wake of the financial crisis just got rolled back
Share

New York (CNN Business) — Federal financial regulators said Thursday they plan to make it easier to let banks invest in venture capital funds and also relax some limitations on derivatives trading. The moves, a loosening of some of the more onerous parts of the so-called Volcker Rule, lifted bank stocks.

The Volcker Rule, part of the broader Dodd-Frank bill enacted in 2010 following the meltdown of big banks in 2008, sought to crack down on risky behavior by Wall Street firms. It was named after former Federal Reserve chair Paul Volcker, who passed away in December.
Many banks and brokerages were using their company’s own money to invest in derivatives such as mortgage-backed securities and other complex financial instruments.
The eventual collapse of the subprime mortgage market — loans to borrowers with poor credit histories — created a ripple effect that led to the collapse of Bear Stearns, Lehman Brothers, Washington Mutual and countless other firms.
Giant banks wound up needing to receive hundreds of billions of dollars in federal bailout money to stop the bleeding.

Submit a Comment