A proposal from the federal reserve would loosen the restrictions on banks ability to make risky investments with customer deposits. “ Fed Chair Jerome H. Powell said the changes would “permit banks to provide limited services to covered funds in ways that do not raise the types of concerns the Volcker rule was intended to address.” Opposition claim the move will weaken the safety net and encourage the behavior the Volcker Rule was meant to prevent. The proposed changes would allow big banks to diversify the risk and make more money. It has been said this change could potentially help small banks to get involved in investments they currently could not get into on there own now. It would also allow tax advantages when investing in startups. The biggest concern is that the big banks capital investments would fail and destabilize the banks and need government bailouts which would drive up the price of insurance and hurt the small banks.
2 comments:
There will be certainly be both outcomes in some capacity as Colten described previously. It will be key to watch because this will show a trend in whether the money is flowing to big banks or small banks.
I think that while it is important for the Fed to step in as the situation in the country is becoming dire, I would be most afraid that they are launching all of their attacks too early. If the economy were to take a prolonged downturn the Fed may put themselves in a position where there is no more they can do without the chance of creating other problems.
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