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Is Volcker Rule Too Complex?

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    CFTC Commissioner Bart Chilton on why the Volcker Rule needs to be streamlined.

  • Duration 6:14
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A regulator who says another major financial calamity could be ahead but he says more regulations and -- a regulator are not necessarily be -- it.

When regulators say that here with his solution is CFTC commissioner Bart Chilton -- at -- -- -- thanks for coming -- good review we've got to hear -- If we can just -- -- JPMorgan first vulture I don't know why are they sending out the FBI.

To investigate -- trade that that never really put the company in danger is that that there was never any danger of any.

Taxpayer bailout when they daddy clearly have a company I'm talking about MF global Jon Corzine's MF global.

Which did things it wasn't supposed to do and they don't have an FBI on their -- Well actually the Department of Justice including the FBI is investigating MF global as is that.

Securities exchange commission and my agency to CFTC.

I -- answer for the FBI with regard to JPMorgan night I I haven't been a an FBI agent since I was twelve years all the the little bad today.

-- -- sometimes I still wish I was -- you know what I'm saying it just seems like they're all over JPMorgan and they've they've been holding back with regard MF global don't.

No I don't think that's the case on not on a and we work you know we have a joint we have we have joint investigations that we do on the MF global situation.

You know I can't give specifics and I'm not one of the investigators but MF global is still going strong I know there's still meeting on that both the Justice Department and SEC and the CFTC.

But you know I I think in general.

The David and -- on JC.

It's just concerning that it's such a large amount of money out -- that's only 10% of their profits from last year but it's still significant amount of money.

And what people I think don't realize is all this trading these credit default products and they had these are things that until Dodd-Frank.

We're totally off of any regulators -- whatsoever I mean.

Totally unregulated so I think what people are doing and maybe some of the reason that investigators and agencies are getting involved is.

They just say we want to take a look see what's going on here because -- -- -- we've never even had a glimmer -- Well -- listen one of the things the JV Jamie -- -- -- is I am for most of Dodd-Frank but he has been very verbally vicious about the Volcker Rule now.

The Volcker Rule is scheduled to be implemented in July so don't really know what it looked like entirely -- last I checked there were 383.

Questions in the Volcker Rule which break down into something like a 1400.

-- question so it's very complicated spot.

It does allow for hedging.

And this London -- trade that got JPMorgan into trouble didn't end involved hedging an is that something that should be removed or should we just.

Cease and desist with more regulation and see what happens when we implement the vocal -- assets.

Well you're absolutely right it's complex and I hope -- streamlined because the -- -- concept behind the Volcker Rule is a good one in that.

You know banks can't be.

One bedding for their bottom line and then to bedding for their customers at the same time we know who's gonna win out if it ever comes push to -- right.

And we've seen that for example Goldman Sachs and Citibank.

Both last year had cases against them where they set up these funds I call them fake out funds like -- a fake out -- ball game or something at because -- they set up these funds they pushed their customers into the fund.

And then the bank's voted and -- bet against those very same funds.

Now they're getting in trouble over this but it does cents set up this sort of troublesome deflect Citi if your bank and you have you're serving two masters.

So I think in general the Volcker Rule the intent of it to stop that troublesome complexity is good.

But regulators that it including our agency live I think we went too far and in trying to have so many.

Little bells and whistles on it that we've made it entirely too complex but that to answer your question briefly on the hedging yes hedging should be allowed.

For the bank's own book.

But not when it speculative and finding that difference between a hedge and speculation.

Is sort of the fine tuning balance that we still need to get on Bart.

Wouldn't the simplest way to deal with all this just go back to the original Volcker Rule which is in fact go back to Glass-Steagall.

That is don't allow investment banks to gamble with federally insured commercial bank deposits.

I actually agree with that Dave I think back and -- this was a part bipartisan issue in 1999.

When.

The last deal was repealed as part of that part of the Gramm Leach Bliley law.

It was Republican congress it was a good President Bill Clinton a Democrat -- there's no partisan blame here people thought that it was the right approach at the time.

And it just really didn't work out that well it was good for the first few years but it didn't work out that well because again we didn't have a view into what was going on right with.

These trades and we can't ignore the FaceBook debacle over the NASDAQ I have to ask you that's electronic trading you've talked about the dangers of something called sheet.

Trading is in this high frequency trading in its regular form or something else.

Well I don't think NASDAQ was to book that the -- traders these high frequency traders who work.

Trying to scoop up micro dollars and milliseconds.

I don't think they were to blame for the NASDAQ thing although that's really in the in the SEC's -- right but I think in general -- All too often regulators are just assuming that these exchanges are gonna work properly the technology that the trading just gonna happen there -- 160 million transactions per day and going on across the world and so we just shouldn't except that this everything's gonna work like expected we need to have at least some inspection of these things to make sure.

They work because we'll have a thing like the flash crash that could happen again if we're not careful so you you don't -- -- have.

-- regulations that are too restrictive you want room for innovation and opportunities for growth.

But you have to have some view as to what's going on Baltic exchanges and with these -- traders are plain speaking regulator on the CFTC commissioners something about being an Arkansas I think that you're forced to speak in plain language that we all understand.

Take -- great to see you again thank you for come again going to be with.

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