Page 138 - TrumpsEconEra_Flat

Chapter 5: The Fed on Steroids

banks and investment banks and required little
government involvement. In contrast, the Volcker Rule
attempts to micromanage banks and is rife with
confusing regulations.
President Trump hopes to repeal the Volcker Rule
and to restore a version of the Glass-Steagall Act.
Republicans believe that the Volcker Rule inhibits
banks’ ability to function and restricts how banks invest
taxpayer-insured deposits. The Volcker Rule is a federal
regulation that prohibits banks from conducting certain
investment activities with their own accounts, and
limits their ownership of and relationship with hedge
funds and private equity funds, also called covered
funds.Under the Obama Administration, Congress
worded the Volcker Rule in such a way that its
interpretation is up to the authorities.

TROUBLED ASSET RELIEF PROGRAM

The repeal of the Glass-Steagall Act in 1999
encouraged banks to take excessive risks, paving the
way to the financial collapse of 2007-2008. On
September 18, 2008, Treasury Secretary Henry Paulson,
and Fed Chairman Ben Bernanke held a meeting with
legislators to propose a $700 billion bailout for banks.
Paulson reportedly told Congress, “If you do not do this,
we might not have an economy on Monday!”
The Emergency Economic Stabilization Act,
which implemented the Troubled Asset Relief Program
(TARP), became law on October 3, 2008. Although the
bulk of the money went to the nation’s largest financial
institutions, authorities used some of it to bail out
automobile, insurance, and housing companies.

-137-