This is the Cato Daily Podcast for Wednesday, February 15, 2012.

I'm Caleb Brown.

The Volker rule is the idea that banks, trades on behalf of their customers shouldn't be fraught with principal agent problems.

But it's not clear that the Volker rule would have prevented the financial crisis, or even

stemmed so-called systemic risk.

Mark Calabria as the director of the Cato Institute's financial

regulation studies.

Proprietary trading is when a financial institution or really any entity trades on its

own account. So it's not trading on its own account.

So it's not trading on behalf of clients.

It's not matching buyers and sellers.

It is simply engaging in speculative market behavior on its own.

What was the role of this in the financial crisis,

given that a lot of firms trading on their own accounts

were trading against the interests of their own

clients and a lot of people are claiming that this creates a principal agent problem that is

advising your clients to do one thing while trading in the

opposite direction on your own.

There's certainly been a number of claims that have been made in terms of how much of a role

that for primary trade trading have in the the crisis would we be in a different

spot if the vocal rule had been in place and of course to some degree the vocal rule is kind of a

minor a modern incarnation of Glass-Steagall so a lot of people who seem to believe that we need to separate

...