Spencer Bachus, Republican of Alabama and chairman emeritus of the [House Financial Services Committee], did assure me that proprietary trading – the kind of concentrated risk-taking that is the focus of the Volcker Rule – had nothing to do with the deep nature of the crisis and the very difficult subsequent recovery.
Unfortunately, he did not appear inclined to discuss the details of what went wrong in 2007-8 at Citigroup, Merrill Lynch, Morgan Stanley, Lehman Brothers, Bear Stearns or Goldman Sachs – or what the more recent London Whale experience at JPMorgan Chase should teach us about the continuing risks of allowing insured banks to gamble in complex derivatives that management does not fully understand.
My opinion: I am very surprised that the chairman emeritus of the House Financial Services Committee made this statement. Personally, I believe proprietary trading had at least some association with the “deep nature” of the crisis.
Ironic Side Note: Former Alabama Representative Henry Steagall was a co-sponsor on the well-known Glass-Steagall Legislation.