PLEDGE NOW
Vanguard's Bogle on the 'Volcker Rule' Reforms

John Bogle, founder of the Vanguard Group, joined us again today. He took on Wall Street and endorsed the “Volcker Rule” reforms put forward by President Obama, based on the proposals of White House advisor and former Federal Reserve Chairman Paul Volcker.

Asked about the proposed reforms, which would re-draw the line between commerical and investment banking, Bogle had this to say:

JOHN BOGLE: It seems to me like the right thing to do. Largely because we’ve developed a system of enormous complexity, where people don’t understand the risks, where the banks and the bank holding companies…have gotten into all sorts of activities that have nothing to do with taking deposits and paying interest on them, lending the money out usually long and paying interest on these short term liabilities.

And that system worked pretty well for a long time. But we are — to state the very, very obvious — a long, long way from what we saw in “It’s a Wonderful Life” with Jimmy Stewart, that little savings and loan out there in Peoria or wherever it was. And that complexity has been very expensive, and in fact very expensive to the banks themselves. The market capital of all of our banks was probably in round numbers, the total value of their equity – common stock in the marketplace – around two and half trillion dollars only a few years ago. And it’s probably under $500 billion today. So these bank executives have cost their shareholders, if you will, $2 trillion. And yet they still get these huge bonuses. That’s a little different issue. But it just shows how badly this system is working. So we’ve got to do something, and I think the Volcker plan is a good start.

Steve Bartlett, who represents a financial services trade group, also appeared on the show today and said there’s no going back to “It’s a Wonderful Life”-style banking. He pushed back against the idea of reinstituting walls between different kinds of banking. Those walls had been in place until 2000, when the Glass-Steagall Act was repealed, and deposit-taking banks started operating in different, riskier, ways.

STEVE BARTLETT: …The difficulty with the so-called Glass-Steagal is that it was a concept to try to separate into fifty or sixty different categories of how to offer financial services. So you have a credit card is separate from a checking account, is separate from an insurance coverage, is separate from a 529, is separate from a mutual fund. And frankly, that whole system had simply broken down by demand of the customers, who wanted financial services and still do. Now, they do want those financial services to be offered in a safe way, with better regulation. And a lot of that regulatory structure broke down and it needs to be rebuilt in a much better way. But restoring back to “It’s a Wonderful Life” is just simply not feasible and would do a lot of harm.

TOM ASHBROOK: John Bogle, simplicity’s too much to hope for?

JOHN BOGLE: No, I don’t think it’s too much to hope for. I mean, we’re in a complex world. I’m the first one to say that. But investors have to wake up to the fact that all this complexity has produced virtually nothing but losses for them.

You can listen to the full Bogle-Bartlett exchange today. On Point has looked closely at these issues before. A recent hour with MIT’s Simon Johnson is worth a listen.

Please follow our community rules when engaging in comment discussion on this site.
ONPOINT
TODAY
Feb 8, 2016
Sign stands outside property for rent Friday, Nov. 20, 2015, in south Denver. (AP Photo/David Zalubowski)

If it feels like rents are sky-high, you’re right. Some now paying more than half their income on rent. Some say crisis. We’ll dig in.

Feb 8, 2016
Legendary film critic  Roger Ebert in an archival image from his early days at the Chicago Sun-Times. (Flickr / WikiCommons)

The critic speaks. The New York Times’ A.O. Scott on how to think about art, pleasure, beauty and truth.

RECENT
SHOWS
Feb 5, 2016
A portion of the cover of Ben Ratliff's new book, "Every Song Ever." (Courtesy Farar, Straus and Giroux / The Publisher)

How to choose music in an age when everything is online and always there. New York Times music critic Ben Ratliff shows the way.

 
Feb 5, 2016
Republican presidential candidate, Sen. Ted Cruz, R-Texas mingles at a campaign event at Robie's Country Store, Wednesday, Feb. 3, 2016, in Hooksett, N.H. (AP Photo/Elise Amendola)

Ted Cruz, Clinton and Sanders out of Iowa. Zika panic. Syrian peace talks fall apart. Our weekly news roundtable goes behind the headlines.

On Point Blog
On Point Blog
Notes From New Hampshire, #4: Donald Trump — You Heard It First!
Friday, Feb 5, 2016

Jack Beatty recounts an evening rally with Republican Presidential frontrunner Donald Trump, and wonders if the billionaire businessman is really looking for an exit.

More »
Comment
 
Our Week In The Web: February 5, 2016
Friday, Feb 5, 2016

Spread the word — we FINALLY have both a new website (in beta) and a new newsletter. Sign up, visit and see what’s happening in the On Point digital universe.

More »
Comment
 
Notes From New Hampshire, #3: Jeb Bush — Cry for Me, America!
Thursday, Feb 4, 2016

Former Gov. Jeb Bush (R) asked a New Hampshire audience to clap for him — and our own Jack Beatty was there to hear it.

More »
Comment