Volcker: Grab Wall Street By The Balls, But Deregulate Normal Banks

Paul Volcker's nuanced financial reform views have been misunderstood by many, which he makes very clear in a new interview with Charlie Rose.

While he wants to clamp down hard on speculative investment bank activities when performed by entities that act as commercial banks, he doesn't want to go back to Glass-Steagall.

He wants to separate the capital markets from commercial banks, but in fact regulate them less than back then once this has been accomplished.

Business Week: The kind of reform I've been advocating is acceptance of the fact that the core of the system remains commercial banking. If that breaks down then you have an enormous crisis. And commercial banks have expanded into areas I don't think are so central. I would cut back their so-called capital market activities—hedge funds, equity funds, commodities trading, trading in derivatives. They're all legitimate functions, but they're not so central. And I don't want to protect all those functions. I don't want to protect everybody because when people act like they're protected, you get in trouble. So let's leave the capital markets to their own devices without any expectation of government protection and keep the existing safety net for the commercial banking system.

http://www.businessinsider.com/paul-volcker-on-glass-steagall-2010-1