Martin D Weiss, founder of Weiss Ratings Agency has made new predictions concerning proposed legislation aimed at making changes to the Volcker Rule, according to Weiss Cryptocurrency Ratings.
Next week, US Congress is expected to move towards changing parts of the Dodd-Franks Law, known as the Volcker Rule, writes the New York Times. The bill, aimed at watering down the legislation named after American economist and former US Federal Reserve Chairman Paul Volcker, would allow thousands of small and mid-size banks to avoid tougher oversight.
Similar legislation has already been passed by the Senate which will allow President Trump to amend the law if the new amendment is passed. The US president also signed a law on Monday nullifying a consumer rule intended to prevent discrimination in auto lending.
The Volcker Rule refers to a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, originally proposed by Paul Volcker in order to restrict United States banks from making certain kinds of speculative investments that do not benefit their customers.
According to Weiss, this will open the door for banks to take the kind of risks and trade the same sorts of assets which helped lead to the 2008 financial crisis, predicting that if the bill were passed, and the amendments come into law, investors would be compelled to move their money away from traditional banking.
Weiss suggests that this is the worst possible time for such a change in legislation, with risk-taking reaching new levels. He cites the JPMorgan Chase index as an example which has revealed that the debt of American companies has just posted one of their worst 100-day returns since 2000.
Weiss reflects on the apparent short memories of the US banking community, given the events of the global banking crisis when financial institutions helped create a historic speculative bubble in real estate, mortgages and mortgage-backed securities. Rich rewards were available for those banks and insurance companies prepared to take excessive risks.
In view of a revisit to the 2000s and a financial meltdown, Weiss suggests that banks will become once again unsound. He compares the bankless economy of many in the Third World who shun banks, often due to the corruption that comes hand in hand with institutionalized local banking, to the sound man’s thinking, “Better to park your money under the mattress or some equivalent”.
Weiss argues that “cryptocurrencies do such a fundamentally better job as a safe depository, it’s difficult to envision a world in which this technology does not become a game-changer for money and banking,” and adds a reminder that Bitcoin was invented in direct response to global government bailouts.
“This is why Satoshi Nakamoto, the inventor of Bitcoin, wrote on the very first Bitcoin block: ‘The time is 03/Jan/2009. Chancellor on brink of the second bailout for banks’,” he adds.
“At the very core of its design stands this one guiding principle: Everyone should own their money directly. Everyone should trade directly with whomever they please. No third party, no custody, no trust in a central authority.”
Weiss suggests there are two clear reasons why he thinks that Bitcoin hasn’t been more widely adopted today. Volatility remains an issue, which he feels will stabilize in time as liquidity grows, and a general lack of knowledge and information about the space, and “even fewer understand the advantages of cryptocurrencies in a wallet over money in a bank”.
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