Paul Volcker spoke to FOX Business Network’s (FBN) Liz Claman about his views on the economy, Eurozone economic issues and his own Volcker Rule under the Dodd Bill, saying the bill “includes the really essential elements that we need. The central issue behind all this is ‘too big to fail’ and moral hazard.”
Here are the key highlights from the interview, courtesy of Fox Business Network:
On the Dodd Bill and Volcker Rule:
“I think the Dodd Bill has some essential elements and some of them haven’t been fully resolved including I guess the so-called Volcker Rule that’s under consideration today. I don’t know where it stands at the moment. I think it does include the really essential elements that we need. The central issue behind all this is ‘too big to fail’ and moral hazard.”
“It certainly has a mechanism that the expectation of ‘too big to fail’–I can’t say go away – but it has a mechanism to deal with that big question. I think it can deal with it effectively, yes.”
On banks not approving of the Volcker Rule:
“Few of our banks have any real significant activity in proprietary trading. There are a very tiny group of banks that are worried about it. The problem goes back to ‘too big to fail.’ There is an elaborate arrangement for decades for protecting banks. I want to make a separation between the activities that are protected and shouldn’t be protected. That’s the heart of the matter.”
On the Merkley – Levin amendment:
“I think the Merkley-Levin bill was a strengthening, a clarification of what the so called Volcker Rule required.”
On his views on the economic outlook of the United States:
“We have a lot of work to do. We are running a big deficit.”
On John Reed of Citi approving of the Merley-Levin amendment:
“John Reed has made a very strong point. No body in a better position to make it than he is.”
On bringing back Glass-Steagall:
“I don’t think we have to go that far. I don’t think it’s necessary, but I do want a distinction between functions that I think are essential to the economy.”
On Sen. Blanche Lincoln’s view on derivatives:
“I have certain sympathy for her concerns on this matter. She goes further than I think is necessary. If you’re providing a derivative to your customers and you have to sell that, it’s a legit banking function.”
On the economic instability in Europe:
“What’s going on in Greece is a challenge to the Euro. At the end of the day Greece, Portugal, Spain have to take measures so they become competitive and don’t have to borrow as much.”
“I think these fluctuations (of the Euro) are excessive.”
On whether the Euro will hit parity:
“Is it a stabilizing factor in Europe? There have been too many ups and downs in currency.”
On the possibility of a VAT tax:
“First priority ought to be to try to reduce the expenditures. Suppose we can’t get the expenditures reduced back to 20 percent of GDP, you have to look at taxes. A value added tax is a possibility.”
On whether he is worried about deflation:
“No.”
On inflation:
“That is a problem as the economy recovers.”
