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U.S. markets recover from steep losses
WASHINGTON, Feb. 2 (UPI) -- Presidential adviser Paul Volcker told members of the Senate Banking Committee the U.S. public did not believe in rescuing speculative banks.
"There has been, and remains, a strong public interest in providing a safety net ... for commercial banks carrying out essential services. There is not, however, a similar rationale for public funds -- taxpayer funds -- protecting and supporting essentially proprietary and speculative activities," said Volcker, chairman of the president's Economic Recovery Advisory Board.
Activities "unrelated to customer needs" such as managing hedge funds, owning private equity funds or proprietary trading "should stand on their own," he said in a prepared statement.
Investment banks, meanwhile, "assumed the cloak of a banking license" to garner public support when the financial meltdown began to unfold in 2008.
"It is critically important that those institutions, its managers and its creditors do not assume a public rescue will be forthcoming in time of pressure," he added.
However, to ban commercial banks from proprietary lending, Volcker said there should first be international support for taking such a step.
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