How Regulators Will Toughen the Volcker Rule
By Donna Borak
After more than three years, 18,000 comments and one whale of a scandal, regulators are closing in on a final Volcker Rule that is expected to be tougher than its first draft. The controversial proprietary trading ban, enacted in the Dodd-Frank Act, has proved to be one of the financial reform law’s most challenging provisions to implement, forcing five regulators to work together in a lengthy process that has frustrated everyone involved. While the concept of the provision is easy to understand — forcing commercial banks to stop taking risky bets with U.S. taxpayers’ funds — the specifics have spurred confusion and discord. “We are trying to be faithful to the intent of this rule, which is to eliminate short-term financial speculation in institutions that enjoy the protection of the safety net,” said Janet Yellen, President Obama’s nominee to succeed Federal Reserve Board Chairman Ben Bernanke, during her confirmation hearing on Nov. 14. “The devil here is in the details.” “There is a real opportunity to complete the rule this year,” said Mary Miller, undersecretary of domestic finance for the Treasury Department, at a recent Bloomberg State and Municipal Finance conference on Nov. 6. “I think that there’s still work to be done before this is completed. But I am very heartened by the progress that I’m seeing and that we’ll get something this year.” Still, regulators have been predicting the Volcker Rule’s imminent finalization for more than a year, leaving persisting skepticism that they can meet the year-end deadline. “I don’t think anybody is talking to anybody,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics Inc. “All of the agencies are sort of in meltdown mode. They’re not talking and they’ve agreed not to talk.”