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The problem is, even if you agreed with Posner and Weyl in principle [to have a ‘financial FDA’ to ‘vet’ financial products], distinguishing between “hedging” and “speculation” is no easy task. That’s essentially what the Volcker Rule is trying to do, and it’s spawned a mind-bogglingly complex 300-page regulation.
Wow! Sounds familiar. In fact I distinctly recall a great blogger who wrote something along these very lines:
Where do you cross the line from an intelligent “macro hedge” into a “prop trade”?
For the life of me, I still do not know. Feel free to answer in comments!
UPDATE: Fixed Craig Pirrong’s name. Here is a relevant post; impossible to excerpt as too many points are right on the money so just RTWT.
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