Swap Meet
Wall Street's war on the Volcker Rule

http://harpers.org/archive/2018/01/swap-meet/
Publisher:  Harper's Magazine
Year Published:  2018
Resource Type:  Article

A look at the opposition to the Volcker Rule, originally proposed by former United States Federal Reserve Chairman Paul Volcker, which restricts US banks from making certain speculative investments that do not benefit customers.

Abstract: 
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Excerpt:

For 173 years, the Stoneman House stood peacefully in the Tuscarawas Valley on the outskirts of Leesville, Ohio. The elegant two-story brick structure was owned and occupied by just three families over successive generations, and when the last of them died, in 2015, it was bought by Energy Transfer Partners, a Texas pipeline company, which promised there would be "no adverse effects" on the historic site. The following year, ETP razed the house to the ground, causing Goldman Sachs to lose $100 million.

The doomed mansion was located close to the projected path of the Rover Pipeline, which was being built to carry natural gas from the Marcellus Shale in Ohio, Pennsylvania, and West Virginia to Canada. Once the $4 billion project was completed, Goldman traders had calculated, the price of Marcellus gas would rise. They placed their bet accordingly. Their wager depended on the pipeline proceeding according to schedule. But the brazen destruction of the beloved mansion, which had been eligible for inclusion in the National Register of Historic Places, enraged national and state regulators, who were further dismayed by toxic spills in protected wetlands and other environmental depredations. Rover was temporarily stopped in its tracks in May 2017. Instead of rising, Marcellus gas prices plummeted - and Goldman lost its bet.

Such wagers were meant to be a thing of the past. A decade ago, Wall Street was a roaring casino and a trader could toss away $9 billion on a single bet. The financial crisis that followed in 2008 generated a forest of new regulations, most of them incomprehensible to the average observer, not to mention the legislators who voted for them. But there was one reform that seemed simple to understand. It was named for the man who conceived it: Paul Volcker, the venerated former chairman of the Federal Reserve.