The Volcker Rule is not the most rigid law to prevent a recurrence of the Great Recession. Yet, banks - especially the banking monoliths - have fought the rule since it was initially proposed. The latest battle is over collateralized loan obligations (C.L.O.s), which are bundles of mostly commercial loans that are sold in various pieces to investors. There are now $431 billion worth of C.L.O.s outstanding.
The rule does not prevent banks from owning any C.L.O.s; it simply cannot own those issued and overseen by hedge funds and private equity firms and contain bonds, equity interests or other assets. If the security is made up only of commercial loans, banks can own them.
It seems as though the rule is trying to achieve its purpose of preventing risky trading. Why do the banks think they should take unnecessary risks with what will be our money?
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