Trump just opened the floodgates for another Wall Street crash

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Completely ignoring one of the biggest factors that led to the 2008 global financial meltdown, the Trump administration is caving to Wall Street and officially putting the fox in charge of guarding the henhouse at America’s biggest financial institutions.

The Chairman of the Federal Reserve, appointed by Trump, took the lead today to announce what amounts to a drastic watering down of the Volcker Rule, put in place after the bailout of Wall Street and the big banks (many owned by Wall Street giants) who had lost billions with their irresponsible behavior.

Under the Volcker Rule, banks and Wall Street were prohibited from investing depositors’ money in high-risk transactions and had to show regulators how each trade they did acted as a hedge against specific risks.

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That meant the regulators were the judges of whether the banks followed the rules.

Now the banks themselves will be allowed to decide what is or is not a high-risk investment, using some additional internal controls they will be required to create.

“This proposal is no minor set of technical tweaks to the Volcker Rule, but an attempt to unravel the fundamental elements of the response to the 2008 financial crisis, when banks financed their gambling with taxpayer-insured deposits,” Marcus Stanley, policy director at American for Financial Reform told The New York Times

“If implemented,” he added, “these proposals could turn the Volcker Rule into a dead letter, a regulation that would not meaningfully restrict trading activities at the banks whose problems could drag down the entire financial system – again.”

The fed action, which must still go through a review process, gets in front of Republican moves in Congress to undo not just the Volcker Rule, but also most of the financial reforms put in place after the global recession caused when a huge number of risky mortgages failed, bringing the American housing market crashing down.

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Trump and the Republicans have pushed to dismantle key parts of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, one of President Obama’s signature legislative achievements, which consumer advocates strongly favored while banks and Wall Street were opposed.

The House voted on May 23 to roll back most of the Dodd-Frank rules, with Republicans almost all in favor and a few Democrats voting with them.

Democrats have called the legislation “The Wrong Choice Act” charging that is could lead to another financial crisis by removing important regulations and consumer protections.

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“Donald Trump and Republicans want to open the door to another economic catastrophe like the Great Recession and return us to a financial system where reckless and predatory practices harm our communities and families,” said Rep. Maxine Waters (D-CA), who has led opposition to the bill.

Proponents have insisted the Dodd-Frank rules forced small banks out of business and hurt the larger financial institutions, who faced limits on how much money they had to hold in reserve and more detailed reporting requirements.

Consumer advocates point out this bailout of the banks comes at a time they are racking up record profits as it is.

“These banks are back to making record profits, but Washington insists on doing them more favors, even if it means raising the risk of another bailout,” Sen. Elizabeth Warren (D-MA) told NBC News.

It is as if there never was a financial crisis that required the U.S. government to put up billions to bail out and save the big banks, who were deemed “too big to fail.”

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Trump and the Republicans have taken huge campaign contributions from Wall Street and the big banks, despite the president’s claim during the 2016 campaign he would get tough on the financial giants.

Once again the president is working hard to help his rich friends while disregarding the risk another economic meltdown would mean for the rest of America. 

Join millions calling for AG Barr to resign after he defied his constitutional obligations to protect Trump!

Benjamin Locke

Benjamin Locke is a retired college professor with an undergraduate degree in Industrial Labor and Relations from Cornell University and an MBA from the European School of Management.

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