The Volcker rule

I thought there was already a chinese wall that did not permit insured deposits to be utilized as funding for I-Banking/Prop Trading activies…again thought only a PORTION of Glass Steagall was repealed; not the entire Act; so this new Volcker rule seems redundant and politically motivated; also seems completely unrelated to the causes of the current crisis Thoughts?

The use of a holding company is what makes this an issue. The deposits arent lent direct by a bank their IB subsidiary but dividends can be funnelled up to the holding company driving down the capital reserves of the bank to use for the IB which is also held by the holding company to make bets on riskier investments. Additionally, you can have a financial advisor sitting in and working with bankers who have access to depositors with large balances. Instead of a money market or savings account, they might suggest the depositor invests in ABS which yield more than an MMA and are considered “safe”. This all has to be done without the plain view of an FDIC sign, but in the same building as a bank. Im sure plenty here will say f*** grandma if she doesnt know what she is getting into, but the disclosures are poor and facilitate transfering savings and tier 1 capital to higher earning but riskier activities.