Citigroup (C) (BAC) (WFC) (JPM) (GS) and Proprietary Trading

On Tuesday the Federal Deposit Insurance Corp. voted 3-0 on the draft rule which would ban proprietary trading at giant banks like Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS) and JPMorgan Chase & Company (NYSE:JPM), among others.

Proprietary trading is when a bank trades their own capital instead of the capital of its clients.

This became an issue when risky investments by bankers in the 2008 crisis resulted in tax payers being required to bail out the banks rather than allowing them to go bankrupt, which should have been the consequences of their actions. There were of course other issues involved as well.

Other agencies which will vote on the implementation of the law are the Securities and Exchange Commission and Treasury Department. The Federal Reserve has already voted in favor of the new draft.

Increasingly it looks like this is all smoke and mirrors, meant to make it appear politicians are doing something, as it remains unclear as to how the enforcement of the ban will be applied, and to what depth.

Already there are uncertainties as to how it'll be determined as to whether or not an investment was meant to provide a benefit to the client or a benefit to the bank.

There appears to be deliberately grey areas in order to give the banks some wiggle room while allowing politicians to brag they've done something about the banksters.

Some of the major banks have already closed down their proprietary trading desks in anticipation of the new rule.