Federal regulators in charge of writing the Volcker Rule, which would ban federally-insured financial institutions from risky proprietary trading, are moving at a faster pace than expected and could have the rule finalized by September.
Wall Street banks have been lobbying to weaken the rule since it was originally proposed by its namesake, former Federal Reserve Chairman Paul Volcker, and now that it is just months away from finalization, their efforts are getting stronger. The chief executives of six major Wall Street banks, led by JPMorgan Chase CEO Jamie Dimon, traveled to Washington yesterday to personally lobby the Federal Reserve on multiple issues — weakening the Volcker Rule chief among them — Bloomberg reports:
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon led Wall Street bosses in a closed-door meeting to personally lobby the Federal Reserve about softening proposed reforms that might crimp their profits.
The contingent, which included Bank of America Corp.’s Brian T. Moynihan, 52, and Goldman Sachs Group Inc.’s Lloyd C. Blankfein, 57, pressed the Fed on rules they said would overstate trading risks and harm financial markets, the central bank said yesterday in a statement. They also discussed what they see as flaws in Fed stress tests designed to gauge the strength of the nation’s largest lenders.
Wall Street banks, with the help of Massachusetts Sen. Scott Brown (R), were able to water down the Volcker Rule even before it became law as part of the 2010 Dodd-Frank Wall Street Reform Act. Since the law passed, they have pushed to make it even weaker, falsely arguing that it poses a major risk to the American economy. The banks have been so successful weakening the rule that Volcker himself was disappointed in its outcome.
Not all bankers oppose the rule. Greg Smith, the former Goldman Sachs trader who publicly resigned from the firm, unknowingly made the case for the rule in an editorial in the New York Times, and a former Merrill Lynch banker recently said the rule was “necessary to correct a mistake that poses a danger to our economy.”