The CFTC’s Bart Chilton was on CNBC this morning discussing a warning letter he sent to Ben Bernanke yesterday regarding the Volcker Rule and Chilton’s concerns that the large banks (ie Morgan and Goldman) will attempt to find and use every loophole they can to get against the prop trading restrictions contained in the Volcker rule.
I’m okay if they hedge their risks. But there’s a thin line between hedging and speculating. So you manage your risks, if that over time, if that hedging of your risk continues to result in large profits like you’re making a lot more money than the risks that you’re losing, then you have to say there’s a presumption that they’re willful and trying to be evasive. We do need to make sure that they can hedge their business risks. It’s just not going crazy and going out and betting against their customers like we’ve seen where they set up these fake info where they populate the funds with their own customers and then take the opposite position to their own customers.
CNBC’s response? We should let the Fed regulate these bank’s compliance with the Volcker rule!
Chilton’s full interview below: