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FBN’s Charlie Gasparino on efforts to implement Dodd-Frank and regulators’ challenges in defining a ‘proprietary trade.’
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-- I don't think so.
Let's get to Dodd-Frank Dodd-Frank financial reform the act was passed and signed into law by President Obama in 2010.
And it still has not been totally implemented.
2010 -- today what is the hold up Charlie Gasparino has the very latest could've possibly BV.
1415.
Questions and some questions that the law has well yes.
You know and many of those question I would say all of them a mini -- that any or involve one you know edict in particular Dodd-Frank knows the Volcker Rule named the Paul Volcker the former Fed Chairman.
Former senior vice it to -- for -- -- Obama.
And economic matters he came up what it would and I plan.
Essentially take risk out of banks make sure they don't roll the dice in the securities markets don't trade do what's known as proprietary trading risky zero capital.
I guess what it sounds simple but it -- that simple and to date.
Regulators in this is the varies for -- involved in this to see if you see the FTC the Fed.
Probably leave at a couple bank regulators along the way generally -- I don't know about the -- it.
They still can't figure out.
Exactly what is a proprietary trading here's the -- what is the difference between market making proprietary trading -- I market -- -- back.
I have a lot of clients out there suppose my clients.
I know they want yet.
I hold -- mom my books.
Those that yen goes up in value at some point is that proprietary trade.
'cause you get some some realistic return upholding -- right -- it and try to traders do prefer customer.
So it's not necessarily a proprietary trades market -- -- customer but I'm making some money -- you could lose money holding that stuff on the books because we should point out.
That journey to financial crisis to resume oil these firms what other wasn't for proprietary trading when he went out like -- hedge fund traded.
Is because they they were basically working for the customers there there were holding bonds on.
In inventory that that they thought the customers essentially by these were mortgage bonds and when the housing.
Market crashed we'll guess what those bonds became worthless and so -- many of the firms were insolvent.
And that's what this -- address and -- tea for market making is is like.
That's part of being the banking -- will not -- have a bank you know there are risks involved demise will not be banking can't be can't market may.
For clients can I just say though JPMorgan.
Wells Fargo Goldman Sachs came in with.
-- earnings for the fourth quarter.
They've managed just fine -- -- backing away from a lot of their proprietary trading in advance and -- saying there's a difference between proprietary trading and market making they are not backing away from market they're hoping not to that part of that but there that's but that's now that's gonna question that's what we're talking about -- we're talking about not risking JPMorgan never was -- in the risk.
Taking of propriety Goldman Sachs was huge.
And -- -- word about diving in the Israelis defense Goldman Sachs can clearly mask.
Because they're Smart enough proprietary trades as market making yes our clients want all this but you know we have.
We can take up positions here in the air we can hedge off these positions and these guys are really Smart Goldman Sachs.
You know let's face it it's run by Lloyd Blankfein Gary Cohn.
They ran that place like hedge funds during during the hearing you know since they got -- -- I think they both.
Became you know senior executives at the top and -- we see music has been running the company -- lawyer Gary -- number one number two beginning in 2006.
He knows Goldman's profits went through the roof at that point they'll also in almost imploded -- -- -- financial crisis.
They would say no I will tell you this it was a for the bailout of AIG.
Goldman Sachs would be underwater because Goldman Sachs held bonds that's part of that -- that that market making stuff and talk let's help bonds and -- balance sheet.
That would backed up by there were insured by AIG's credit default swaps so.
There we have it it's it's an agency debate.
You know he and market making you kind of end the backs that -- -- -- Asia -- don't they need that stuff for their clients.
And you know this gets back to the -- constable -- as -- bank you know maybe -- thank -- just be smaller.
When you're small you could take risks.
You know -- you take this -- -- small you don't blow the entire financial system pop -- the bickering and that's because some of this is clearly I mean logic dictates you should be making markets.
But can also take enormous -- market make.
Whatever this is good -- -- yeah.
That works.
Its they'll tie -- -- at the time that -- -- it's not that I don't I just think that this works and just hide the gold chain a little bit more.
Need more people -- changes rather upbeat jobs I'm -- some reason people gold chains I can barely see get the job done.
That's who need some more gold chain guys I think you get the job done closing bell --
