Finally, The Volcker Rule

Several years after the passage of Dodd-Frank, one of it’s critical provisions has finally been enacted.  The Volcker Rule named for it’s most famous proponent, former Fed Chair, Paul Volcker, requires that banks not use the funds of customers to invest in securities for their own benefit.  Reaction was mixed.

Five federal agencies today voted to approve a Volcker Rule that, with preamble included, comes to 964 pages. Gluttons for punishment can read it here (PDF).

The final rule is tougher on the banks than many had expected and will prohibit some risky trades that until now have been permitted. But its complexity repels both people who favored stronger measures and those who argue for a lighter hand. It’s hard to find anyone connected with the rule-making who doesn’t feel conflicted and tuckered out.

The passage of the rule is to be celebrated but it will be quite a while before we know how big the loopholes are and whether it accomplishes its very important goal.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.