The innocent eye might have trouble spotting this loophole. The Dodd-Frank bill bans proprietary trading (Page 245: “Unless otherwise provided in this section, a banking entity shall not engage in proprietary trading”) and then appears to make it clear what that means (Page 565: “The term ‘proprietary trading’ means the act of a (big Wall Street bank) investing as a principal in securities, commodities, derivatives, hedge funds, private equity firms, or such other financial products or entities as the comptroller general may determine”).
Regulation proprietary trading under Dodd Frank. There are three weaknesses in the law. First is the words “as a principal”. It is up to the GAO to determine what that means and big banks are already acting as if they know and so the GAO coming in later will likely go along
Second the law allows up to 3% of funds to be invested as proprietary and with big banks this amounts to billions.
Third it encourages big banks to move out of the country since the bill allows for that.
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