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Topic Title: Glass Steagall vs Volcker: What's the difference?
Created On Mon May 17, 10 04:22 PM
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Ciportne
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Mon May 17, 10 04:22 PM
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I've been reading news articles about the 'Volcker Rule' and trying to establish the difference between this and Glass Steagall (1933).

The more I read the more confused I get.

For example in the New York Times;
http://economix.blogs.nytimes.com/2010/01/22/glass-steagall-vs-the-volcker-rule/

Quote

"[The Glass-Steagall act] required banks to spin off or shut down their brokerage and investment operations"


However it concludes with;

Quote

"The president is acting on a proposal that Paul Volcker, the former chairman of the Federal Reserve, has been pushing for months. It is sometimes referred to as ?Glass-Steagall in spirit.? But the behavior involved and the proposed solution are different enough for the legislation to have its own nickname ? and Obama himself has suggested one: the Volcker Rule."


My pro-forma conclusion is that the Glass Steigall act separated Commercial and Investment banking. Whereas the Volker act will forbid deposit-taking banks from prop trading

Quote

"or owning, investing in or sponsoring hedge funds or private equity funds."

Source: The Daily Telegraph (Online)
http://www.telegraph.co.uk/finance/comment/7067330/Volcker-Rule-is-necessary-to-prevent-bank-failures-turning-into-a-crisis.html

Is this the general consensus?


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Ciportne
 
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Hansi
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Mon May 17, 10 04:57 PM
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Originally posted by: Ciportne
My pro-forma conclusion is that the Glass Steigall act separated Commercial and Investment banking. Whereas the Volker act will forbid deposit-taking banks from prop trading


This sum up my understanding of the two + having prop trading subsidiaries.
 
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frattyquant
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Tue May 18, 10 10:54 AM
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Ciportne,

Your understanding is correct, just replace deposit taking banks with the more ambiguous "bank holding corporations".
 
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