rwnjs, Dodd-Frank and The Volcker Rule
You’ll be pleased to hear I think I’ve found the answer to my Dodd-Frank question.
The Question: Why do I keep hearing from the rwnj’s in my life that Dodd-Frank is the reason we are in such an economic mess right now?
The Answer: The Volcker Rule.
What about the Rule has the banks in such an uproar? The draft was just published and it won’t be formally approved until January 2012. They are getting everyone in an uproar to try to get the changes they want approved.
A Draft of the proposed Legislation was leaked earlier this month. The entire Rule is something like 268 pages (which I can’t find on the web-yet), very little of which I care to research and understand. It is intended to “limit banks from investing in hedge funds and ban propriety trading” It only applies to institutions that have a certain amount of assets (IIRC).
Named after Paul A. Volcker, a former Federal Reserve chairman who championed the rule as part of Dodd-Frank, it would order banks to limit their investments in hedge funds and private equity shops.
More significant, the Volcker Rule would prohibit federally insured banks from trading for their own benefit rather than for clients, a strategy known as proprietary trading. The rule, Mr. Volcker and Democratic lawmakers say, will prevent banks from using their own capital to place bets while the government guarantees their deposits.
‘Financial firms have been engaged in high-risk high-jinks that have threatened the U.S. and worldwide economy and economic recovery,’ Senator Carl Levin, Democrat of Michigan, who co-sponsored the Volcker Rule in Congress, said on Wednesday. ‘The Volcker Rule is essential to protect taxpayers from banks’ excessive financial risk-taking, conflicts of interest, and from the resulting billion-dollar bailouts. I look forward to reviewing the proposed rule and hope the regulators reject efforts to weaken the law.’
Lobbists must be working fervently: