U.S. government gifts big banks with relaxed Volcker Rule, $40 billion in freed up cash

Wall Street has just been given a big fat gift.

United States banking regulators announced on Thursday that they will ease restrictions and regulations for the big banks and their investment portfolios with a couple of rule changes.

The first is that banks will now be permitted to make larger investments in riskier funds, such as venture capital funds. This has been part of the Republicans’ efforts to dismantle the so-called Volcker Rule.

The second no longer mandates banks to put money into a rainy day fund to protect derivative trades between affiliates within the same firms. The finance industry this rule change alone could free up to $40 billion in previously reserved cash.

As expected, banking stocks skyrocketed and helped erase most of the losses in the leading stock indexes.

Will this lead to another financial crisis that requires a banker bailout?

If it does, you can expect another case of privatizing gains and socializing losses.

File this away for future reference.