Volcker Rule Vote on Deck...How Bad is This?

What are your thoughts on this? I'm curious to hear WSO's opinion

From Dealbook:

Volcker Rule on Bank Risk Approaches Its Final Edits
Federal regulators have reached a tentative agreement to complete a rule aimed at Wall Street risk-taking, federal officials said on Tuesday, overcoming internal squabbling and an onslaught of Wall Street lobbying that stymied them for years.

Five federal agencies plan to approve a tougher-than-expected version of the so-called Volcker Rule next week, eking out passage before the year is up and providing Wall Street with some much-sought clarity. While the vote for the complex rule will come more than a year after a Congressional deadline passed, it still will meet the recommendation of Treasury Secretary Jacob J. Lew, who urged the federal agencies to finish writing the rule in 2013.


The Commodity Futures Trading Commission, one of the five agencies, announced on Tuesday that it would vote on Dec. 10. Three other agencies — the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency — also announced plans to approve the rule on Dec. 10. The final agency involved in the rule, the Securities and Exchange Commission, has said it will vote on or about that date.

The rule, which would ban banks from trading for their own gain and limit their ability to invest in hedge funds, is not yet a done deal. Regulators continue to put the finishing touches on the rule, a centerpiece of the Dodd-Frank overhaul law that Congress adopted in 2010, and talks could still break down. The S.E.C. is still expected to send in final edits over the next day or so, an official briefed on the rule said.

But the announcements on Tuesday signal that regulators have all but completed a final draft, a prospect that once seemed remote.

Of all the 400 regulations to arise from Dodd-Frank, regulators struggled most with the Volcker Rule, which officials say will span about 950 pages. The challenge underscored the importance of the rule, which became something of a barometer for the overall strength of Dodd-Frank.

The Volcker Rule — named for Paul A. Volcker, a former chairman of the Federal Reserve who championed the rule when serving as an adviser to President Obama — was politically charged from the beginning. Some Democrats said that it could prevent future trading blowups on Wall Street, a position that gained traction when JPMorgan Chase sustained a $6 billion trading loss in London last year, but Republicans complained that it might undercut economic growth.

http://dealbook.nytimes.com/2013/12/03/volcker-rule-set-for-vote-next-w…

 
Best Response

It's already been phased out of all the bulge brackets and they are in compliance with most requirements of Dodd-Frank already. It was the main strategic goal for 2013, some things are still outlying but on target. The issue is there are so many loopholes and nonspecifics that the banks use to their advantage. This applies to any regulation though, the banks follow the exact wording regulators supply... and let's just say they are not the most efficent when rushed, they put out some terrible rules.

For anyone still confused by the specifics of just the volcker rule, skadden has the best summary: http://www.skadden.com/newsletters/FSR_The_Volcker_Rule.pdf

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."
 

Can someone please explain to me how this legislation will apply for non-US banks? Just curious as to how an American law can dictate business of a foreign bank with operations in the US. Seems like they could finagle their way out of it with some good lawyers or something.

NVM: http://www.PwC.com/gx/en/financial-services/issues/regulation/how-will-the-volcker-rule-affect-non-us-banks.jhtml

Decided not to be so lazy for once.

People demand freedom of speech as a compensation for freedom of thought which they seldom use.
 

PwC explains it well, but in short... if you deal with any US business, it can apply. This includes dealing with a US counterparty, having US branches, etc.

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."
 

I just think this is demonstrative of the entire Dodd-Frank bill. The 2008 financial crisis fundamentally occurred because of one reason and one reason only--bad mortgages caused by poor mathematics, poor predictions, poor underwriting processes and standards, fraud, incompetence, the CRA, poor regulatory oversight, the GSEs, Congressional pressure, and Federal Reserve monetary policy. Everything else was secondary or even tertiary to the crisis, and proprietary trading certainly isn't what brought down the system.

Really what has been done to prevent further real estate and mortgage bubbles or to prevent too-big-to-fail banks? Absolutely nothing of substance. If anything, we are already in a new real estate bubble. The boom and bust cycle and the bank failures that cycle brings will continue.

 

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