Citigroup and Bank of America crippled the banking system more than most people know; but Paul Volcker, one of the few who could bring our banking system in line, knows. There's nothing he doesn't know.
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It's pretty clear the most disgruntled man in Washington 15 days ago was Paul Volcker. He had been pounding the table to bring back Glass Steagall since Thanksgiving, and had been consistently ignored by the Obama administration. He clearly stated the only invention worth a damn to come from the banking system in the last 20 years was the ATM machine.

Mr. Voclker, the man who was Chairman of the Federal Reserve under Jimmy Carter and Ronald Reagan, is an old fashioned banker, one of the few men who could bring our system back into line. But he had become a Cabinet outcast, the 12th man on the deal team, and I even heard rumors he threatened to walk. Until last week, when he suddenly leap-frogged the teacher's pets Treasury Secretary Tim Geithner and Larry Summers, Head of the White House Economic Team. This stalwart supporter of Obama during the election, with more experience than Geithner and Summers combined, was suddenly heard like a Confederate artillery shell at the Battle of Antietem.

Obama's proposal is expected to restrict the size of large financial institutions, stopping them from becoming so large they put the broader economy at risk, and distort normal competitive forces -- kind of why Glass-Steagall existed in the first place. These banks are not too big to fail. They're too big to succeed. They're too big to be managed. And they're too big to compete with.

For the first time publicly, the President started to endorse the Princeton-educated Paul Volcker, who wants to place restrictions on proprietary trading by commercial banks, essentially limiting the way banks can gamble with their own capital. Administration officials say they want to place "firewalls" between different divisions of financial companies, to ensure banks don't indirectly subsidize "speculative" trading through other subsidiaries that hold federally insured deposits.

Mr. Volcker also stands against banks owning hedge funds and private equity shops. The proposals are intended to go even further, separating all customer-focused investment banking activities, such as advisory services, securities underwriting and brokerage, from proprietary trading.

The clowns running Citigroup (C) and Bank of America (BAC) risked depositor money by investing over $250 billion in mortgage backed securities, much of it in off balance sheet SIVs, rolling the dice and leaving Uncle Sam to hold the bag. These two behemoth institutions crippled the banking system more than most people know; but Volcker knows. He joined the Treasury Department nearly fifty years ago in 1962. There is nothing he doesn't know.

But the most vexing action by the administration in the last 10 days concerning the "Crisis Responsibility Fee" and the "Volcker Rule" is the perception that GM, Fannie Mae (FNM), Freddie Mac (FNM), and AIG all seem to get a free pass relative to the big changes coming to Wall Street. They didn't own any hedge funds or private equity firms and they still managed to lose billions.

We have never seen results from the infamous Spring Stress Test, even though, as taxpayers, we're footing the bill on the bailout. Citigroup and Bank of America were both insolvent in November 2008 and during the March 2009 lows. If you look at their recent earnings, you'll see they're bleeding out the truth, because they and our government think the markets, like Jack Nicholson in A Few Good Men, can't handle the truth.

This could be the genesis of the Volcker Rule. This administration will do anything to stop us revisiting the financial abyss of 2008, and now, the man who ended the stagflation crisis of the 1970s, has finally been heard.

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