Lewis: Disappearing Proprietary Traders?

Michael Lewis

In the run-up to the vote on the financial overhaul bill, the big Wall Street banks squashed an attempt by Senator Carl Levin to pass a simple ban on any form of proprietary trading. A Senate staffer close to the process told me the amendment was one of Wall Street’s highest priorities, spreading money around to exert as much pressure as possible. It worked: Levin’s amendment never reached the Senate floor for a vote. The final version of the bill restricts proprietary trading but allows big Wall Street firms to invest as much as 3 percent of their capital in their own internal hedge funds. How exactly the new rules are enforced is left to regulators inside the Federal Reserve, but it’s not hard to see how a wholly owned hedge fund might become a proprietary trading group, with a different name. The 3 percent loophole amounted to an invitation for the big banks to keep on doing at least some of what they had been doing -- which is why Levin felt compelled to remove it, and the banks fought so hard to keep it. Read more here:

Lewis: Disappearing Proprietary Traders?