Volcker Rule Delay and Simplification Gains Support in Congress

By Steven Sloan and Phil Mattingly

A bipartisan group of U.S. lawmakers is backing a delay in finalizing a ban on proprietary trading by banks without urging regulators to ease the rule. Six senators introduced legislation yesterday that would postpone implementation of the so-called Volcker rule from the July 21 deadline set by the Dodd-Frank Act and align it with regulators’ completion of detailed rules for the trading ban. Meanwhile, Representative Barney Frank, the Massachusetts Democrat who co-authored the law that requires regulators to impose the ban, released a statement urging banking agencies to complete a simplified version by Sept. 3.  “Without such legislative or regulatory action, there is a potential for tremendous disruption to the securitization markets well before July 21, 2012 that may ultimately reduce critical credit availability to consumers, municipalities and small, medium and large businesses around the United States,” Tom Deutsch, executive director of the American Securitization Forum, said in letter to regulators this week. The bipartisan work on providing clarity is necessary, even after assurances from Bernanke last month that regulators would not enforce the law if the rule was not in place, said Karen Shaw Petrou, co-founder and managing partner at Washington-based Federal Financial Analytics Inc., a regulatory consulting firm. “I can understand why their lawyers would find this situation a little uncomfortable,” Petrou said.