Summary of The Volcker Rule and Market-Making in Times of Stress

Looking for the report?
We have the summary! Get the key insights in just 5 minutes.

The Volcker Rule and Market-Making in Times of Stress summary
Start getting smarter:
or see our plans

Rating

7 Overall

8 Importance

7 Innovation

6 Style


Recommendation

Economists Jack Bao, Maureen O’Hara and Alex Zhou look into whether regulators have gone overboard in their curtailing of the financial sector’s activities following the 2008 financial crisis. They examine the Volcker Rule, one of the crisis-inspired regulations, and its impacts so far on liquidity in the corporate bond market. Their findings describe a butterfly effect in the financial ecosystem: The commendable aim of protecting taxpayers from banks’ speculation can have harmful unintended consequences. getAbstract suggests this scholarly, illuminating analysis to regulators, financial executives, broker dealers and risk managers.

In this summary, you will learn

  • How the Volcker Rule has affected liquidity in the corporate bond market,
  • What the rule’s impact has been on broker dealers and
  • Whether other regulations might also be responsible for the decline in corporate bond market liquidity.
 

About the Authors

Jack Bao and Alex Zhou are economists at the Federal Reserve Board. Maureen O’Hara is a finance professor at Cornell University.

 

Summary

One regulatory consequence of the 2008 financial crisis was the enactment of the Volcker Rule, which limited certain financial institutions’ ability to engage in speculative activities. The rule says that a bank that has recourse to government support can’t engage in trading for its own account or have...

More on this topic

Customers who read this summary also read

The Man Who Knew
The Man Who Knew
9
Banks as buyers of last resort for government bonds?
Banks as buyers of last resort for government bonds?
7
Dwindling Numbers in the Financial Industry
Dwindling Numbers in the Financial Industry
7
How Does the Fed Adjust Its Securities Holdings and Who Is Affected?
How Does the Fed Adjust Its Securities Holdings and Who Is Affected?
8
Enhancing the Strategic Potential of Treasury
Enhancing the Strategic Potential of Treasury
7
We need a European Monetary Fund, but how should it work?
We need a European Monetary Fund, but how should it work?
8

Related Channels

Comment on this summary