The NYT has an interesting interview with Paul Volcker regarding reform and regretting past silence. It is filled with fascinating insights from the former Fed Chairman:
– “People are nervous about the long-term outlook, and they should be.”
– Reform legislation doesn’t go far enough in curbing potentially problematic bank activities; it still gives banks “too much wiggle room” to repeat their reckless behaviors
– He would ban FDIC commercial banks from proprietary trading. Quote: “I did not realize that the speculative trading by commercial banks had gotten as far out of hand as it had.”
– Reagan replaced Volcker in large part due to his “reluctance to deregulate;” most deregulation came after he left the Fed.
-Alan Greenspan openly campaigned to repeal Glass-Steagall. Volcker opposed the repeal, but he didn’t go public with his concerns.
-He regrets “failing to speak out more forcefully about the dangers” of financial deregulation.
– “In the wake of those changes, banks were suddenly free to charge more for risky loans, and that encouraged risky lending. The subprime mortgage market grew out of this dynamic, as did the panoply of complex, mortgage-backed securities, credit-default swaps and heart-stopping leverage that finally produced the 2008 crisis.”