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Call -- relieved to hear of this show for a couple of reasons first of all he warned -- nation about tearing down the wall used to separate commercial banks and financial houses.
His prediction that -- all suffer from this were borne out by the sub prime mess in the subsequent bailout secondly.
He had the guts to squeeze inflation out of economy in the early 1980s when he was head of the Federal Reserve.
-- now he's at the center of the Obama administration's effort to regulate financial markets including.
His suggestion for the so called Volcker Rule which would ban banks from making risky trades -- their own money in a first on Fox Business interview we now go live.
To Stanford University where Liz claim -- -- -- by without legendary Paul Volcker list.
Indeed did but I am he has of course one of the most widely respected economists in the world he's also quite outspoken he is here with us.
At the Stanford institute for economic policy research will you will be getting the inaugural award congratulations.
Aren't true or not it's certainly good -- well if you listen and most people are winding down their professional lives you're just taking -- Starting -- her.
-- Really getting exciting.
And and specifically about what my calling her gave announcement just talked about and that is the Volcker Rule within -- bill.
It's in there but a lot of people are looking at this and saying we -- end up being what you originally envisioned.
-- -- -- -- -- -- -- -- -- -- -- -- The proprietary trading would be removed from banks that help depositors.
-- Dutch banking institutions.
Not just the fact that the whole American organization.
Hedge funds and private equity firm and just -- Not be your -- drug -- by it's not be run by banks.
And no -- -- do you feel that the -- bill is is shaping up with the proper.
Sort of fortitude within.
Well I think -- -- bill has some essential element.
And so we remember him fully resolved including just so global who'll be under consideration -- other mergers were.
Stands with the -- but I think it does include the really essential element community.
-- -- -- Strong approach toward.
Derivatives and perfectly credit to pulse -- you've been so much.
In the news is so much of an issue.
And pushing them on through sharing views and and then clearing houses I think is much of that can be done is possible should be time it's got this resolution they usually.
I think an important element.
The central issue behind all this is too big to fail -- the mall -- Members -- help -- resolution agency.
You -- deal was a big.
Complete non bank institution -- maybe disturbing.
For one of -- Ellsbury who have a mechanism for thinking it over promptly by the government.
And liquidating it.
And that's an emphasis -- you're being too big to fail.
So I just want to get this.
Particularly clear you feel that the dog bill from what you know right now does eliminate the too big to fail there within some of these big finance -- let's.
Certainly has a mechanism so that the expectation and too big to fail shared.
I -- -- go away there be some suspicion -- for a long period of time but it it has a mechanism.
To deal worth.
Without big question and I think you can deal would effectively give -- the bank's mr.
Volcker would argue that proprietary trading hedge fund involvement private equity is what makes them money it is riskier but it's more lucrative for them they don't like your poker world explorer and some of them don't like that very few of our banks.
Have any real significant.
Activity and proprietary -- bore -- is a very tiny group of banks worried about it it is not.
The thought of those banks.
The problem is that.
Because -- -- that too big to fail should there is an elaborate.
Arrangement for decades.
For protecting banks banks can go to the farmers are gonna get in trouble their deposits are insured.
They have certain advantages from that.
Respectively also certain regulation.
The issue here should that government support should that taxpayer support.
The extended to institutions.
That an invasion trading for their own account.
That don't need to be protected and shouldn't be protected I wanna make -- separation between the activities that are protected.
And -- and your charity should not be protected got.
Still haunt them -- in that this bill.
Senators Berkeley and senator Levin are are coming forth with an amendment that in essence Mears -- Volcker Rule although in late news today.
There was word that it would exclude institutions that don't take deposits make loans or access the Fed's discount window that the lobbyists get to that -- the obvious.
Our work and no question -- I don't know anything about where you're not talking about I think the Mercury program bill which is strengthening.
Frankly clarification -- -- you basically.
What so called full bloom court.
And that it was important clarification -- American clarification on promotional people who interpret them is softening.
What -- and although I was not so.
I'm looking at who likes it who doesn't John -- of city which of course we know made billions in bad proprietary trades during the -- that -- to the financial crisis.
He's actually on board with this amendment and he supports it do you want Wall Street on.
Or no more environmentally appropriate the Barclays yellow orange certainly onboard -- yes.
John -- is married and from an experience.
Very strong point.
And you nobody better position to make it -- he is hugely experienced at Citibank Citicorp's Citigroup went through.
And combining commercial banking organization.
With some are overly aggressive trading operations.
And -- you linking those two cultures.
You -- really bad cocktail.
You're starting to hear some of these guys on Wall Street say few of them bring back classical do you think we should I don't think we have to go that far -- -- -- -- -- -- Do -- bit -- -- -- in one particular thing -- should banks cannot underwrite corporate securities.
I think I -- the way the markets have developed underwriting corporate securities by banks.
There's several to their customer relationship and other respects they make loans to these banks you can securitized -- It's a reasonable -- to say they can underwrite them nothing that I have proposed.
Lord show you mentioned -- underlying security for their customers.
And that was a lot of class people and I don't.
I don't think is necessary these are -- who.
Go back literally request legal nor do want -- operation.
Returned functions -- think there is central to the economy.
Running the payment system providing a depositary for you or anybody else usually plays to put their money extremely important during this little crisis.
Providing loans -- small or medium size businesses backing up to commercial paper market those are all critical functions.
You don't need to do proprietary trading to carry out those functions somebody else in the market ought to do that and that they fell in -- -- Derivatives.
Derivatives right now Blanche Lincoln the senator from Arkansas is now saying late breaking news today.
That she will fight to make sure that swaps -- to -- derivatives desks are separated from the financial institutions.
-- You know certain sympathy for concerned about his mother usually goes further frankly than than.
I think you know she showed I would say has promoted in the dog though.
If you're dealing.
You're providing -- -- -- for your customers.
You have to show up if you durable or shut -- or whatever that's a legitimate commercial banking function.
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