NPR logo Morning Report: The 'Volcker Rule' Raises Hackles


Morning Report: The 'Volcker Rule' Raises Hackles

After the stock market smacked down the president's proposal for increased banking regulation yesterday, the big banks immediately line up in opposition to the plan. Obama's new favorite economic adviser, Paul Volcker, will be spending more time on Capitol Hill in the coming weeks to round up congressional support for what's being dubbed "the Volcker rule." The proposal will put limits on the size of banks, and also prohibit commercial banks from engaging in one of the activities they love—and Volcker hates—most: proprietary trading. We'll have more on proprietary trading on the podcast today. But basically, it's when banks use their own accounts, in some cases depositor money, to make potentially risky trades.

Today, chatter continues from the banks on why any kind of regulation is a terrible idea— from Bloomberg:

President Barack Obama's plan to curb proprietary trading will cost Goldman Sachs Group Inc., Morgan Stanley, Credit Suisse Group AG, UBS AG and Deutsche Bank AG about $13 billion in revenue next year, according to JPMorgan Chase & Co. analysts. Of the five banks analyzed, Obama's proposals will impact Goldman Sachs the most, resulting in an estimated $4.67 billion drop in earnings in 2011, analysts led by London-based Kian Abouhossein said in a note today.

But not all areas of the market were sulking. McDonalds posted high fourth-quarter profits, maintaining a lead in fast-food markets— could be their fancy McCafe coupled with a new dollar menu for breakfast. Google also turned in stellar gains, a sign of increased online ad revenue generated during the holiday season, according to the Wall Street Journal. The company also promised this week that it would continue doing business in China. A week ago, Google said it would pull out of the country, which has the greatest number of internet users in the world, because of hacker assaults and government censorship. Secretary of State Hillary Clinton jumped into the fray, prompting a contentious response from the Chinese. And lastly, Toyota— already in the unenviable position of holding the record for the largest auto recall in US history after it pulling 4.2 million cars off the road last year— solidified its dubious title today. The company recalled 2.3 million vehicles due to sticky gas pedals.