One of Dodd-Frank’s most well-known provisions was completed Tuesday, three and a half years after President Obama signed the sweeping financial-reform law.
Five agencies passed a final version of the so-called Volcker Rule on Tuesday. Three of the 20 regulators who voted on the law opposed it.
The Volcker Rule, named for the cigar-loving former Federal Reserve Chairman Paul Volcker, bans banks from making certain speculative bets with their own money. It was an attempt, through the 2010 financial-reform law, to curb risky behavior at financial institutions.
The provision has drawn substantial advocacy and lobbying on both sides of the aisle. Pro-reform advocates worried it would be too weak to guard against reckless behavior and taxpayer bailouts of Wall Street firms; Wall Street feared it would put U.S. banks at a disadvantage with their foreign counterparts and stop financial firms from engaging in what they viewed as essential activities. The release of a 298-page draft proposal in 2011 garnered nearly 500 “substantive and unique” public-comment letters and roughly 18,000 in total, according to a Fed document.
The final version may bring a similar outpouring of commentary, although things appeared relatively calm Tuesday morning as lawyers and lobbyists began to sift through the 71-page rule and its nearly 900 pages of accompanying preamble.
The U.S. Chamber of Commerce’s David Hirschmann, who heads the group’s Center for Capital Markets Competitiveness and who has fought against the Volcker Rule, focused on the rule-writing process rather than its substance in his initial comments. Hirschmann said he was “disappointed” that the regulators didn’t re-propose the rule for further comment before finalizing it.
“We will now have to carefully examine the final rule to consider the impact on liquidity and market-making, and take all options into account as we decide how best to proceed,” he said in a statement. Hirschmann told National Journal that his colleagues would spend the next few days trying to get a clearer picture of what the rule would mean in practice for the chamber’s members.
The financial-reform advocates at Better Markets, on the other hand, offered cautious optimism. “Today’s finalization of the Volcker Rule ban on proprietary trading is a major defeat for Wall Street and a direct attack on the high risk ‘quick-buck’ culture of Wall Street that focuses on big short-term gains regardless of the risks to others,” Better Markets President Dennis Kelleher said in a statement after the final rule was released.
Sens. Jeff Merkley, D-Ore., and Carl Levin, D-Mich., who pushed for the provision to be included in the financial-reform law, struck a similar tone. “Early indications suggest that persistence and common sense can prevail in the face of even the fiercest special-interest lobbying campaigns: Hedging looks tougher, market-making looks simpler, trader compensation remains appropriately structured, and CEOs are required to set the tone at the top,” they said in a joint statement.
The main difficulty in writing the rule, regulators said, was differentiating between market making and hedging, which are allowed, and proprietary trading, which is not. This is hard, Fed Gov. Dan Tarullo said, because the same trade can be allowed in one context or circumstance, but forbidden in another. The final rule also contains a number of exemptions to the proprietary trading ban, such as trading in various government obligations. Regulators also said they would be open to tweaking the rule as time went on as they received feedback.
There’s still much to be done to implement the rule and ensure banks are complying, in addition to the minefield of possible lawsuits and other challenges. But on Tuesday, Fed General Counsel Scott Alvarez turned to the Beatles to explain how the regulators who have been working on the rule since its inception are feeling: “We made it through truly an ‘Octopus Garden’ of issues and a thicket of comments in the ‘Norwegian Wood,’ and finally we can say, ‘Here Comes the Sun.’ “
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Foreign Policy takes a look at the future of mining the estimated "100,000 near-Earth objects—including asteroids and comets—in the neighborhood of our planet. Some of these NEOs, as they’re called, are small. Others are substantial and potentially packed full of water and various important minerals, such as nickel, cobalt, and iron. One day, advocates believe, those objects will be tapped by variations on the equipment used in the coal mines of Kentucky or in the diamond mines of Africa. And for immense gain: According to industry experts, the contents of a single asteroid could be worth trillions of dollars." But the technology to get us there is only the first step. Experts say "a multinational body might emerge" to manage rights to NEOs, as well as a body of law, including an international court.
Not to be outdone by Jeffrey Goldberg's recent piece in The Atlantic about President Obama's foreign policy, the New York Times Magazine checks in with a longread on the president's economic legacy. In it, Obama is cognizant that the economic reality--73 straight months of growth--isn't matched by public perceptions. Some of that, he says, is due to a constant drumbeat from the right that "that denies any progress." But he also accepts some blame himself. “I mean, the truth of the matter is that if we had been able to more effectively communicate all the steps we had taken to the swing voter,” he said, “then we might have maintained a majority in the House or the Senate.”
Ronald Reagan's children and political allies took to the media and Twitter this week to chide funnyman Will Ferrell for his plans to play a dementia-addled Reagan in his second term in a new comedy entitled Reagan. In an open letter, Reagan's daughter Patti Davis tells Ferrell, who's also a producer on the movie, “Perhaps for your comedy you would like to visit some dementia facilities. I have—I didn’t find anything comedic there, and my hope would be that if you’re a decent human being, you wouldn’t either.” Michael Reagan, the president's son, tweeted, "What an Outrag....Alzheimers is not joke...It kills..You should be ashamed all of you." And former Rep. Joe Walsh called it an example of "Hollywood taking a shot at conservatives again."
In a sign that she’s ready to put a longer-than-expected primary battle behind her, former Secretary of State Hillary Clinton (D) is no longer going on the air in upcoming primary states. “Team Clinton hasn’t spent a single cent in … California, Indiana, Kentucky, Oregon and West Virginia, while” Sen. Bernie Sanders’ (I-VT) “campaign has spent a little more than $1 million in those same states.” Meanwhile, Sen. Jeff Merkley (D-OR), Sanders’ "lone backer in the Senate, said the candidate should end his presidential campaign if he’s losing to Hillary Clinton after the primary season concludes in June, breaking sharply with the candidate who is vowing to take his insurgent bid to the party convention in Philadelphia.”
The team behind the bestselling "Clinton Cash"—author Peter Schweizer and Breitbart's Stephen Bannon—is turning the book into a movie that will have its U.S. premiere just before the Democratic National Convention this summer. The film will get its global debut "next month in Cannes, France, during the Cannes Film Festival. (The movie is not a part of the festival, but will be shown at a screening arranged for distributors)." Bloomberg has a trailer up, pointing out that it's "less Ken Burns than Jerry Bruckheimer, featuring blood-drenched money, radical madrassas, and ominous footage of the Clintons."