MOUNT PLEASANT, Wisconsin — Rep. Paul Ryan (R-WI) made a surprising policy assertion late last week, seemingly telling a Wisconsin town hall that he supports a key financial regulation pushed by President Obama and progressives in Congress.
“If you’re a bank and you want to operate like some non-bank entity like a hedge fund, then don’t be a bank,” Ryan told constituents on Friday. “Don’t let banks use their customers money to do anything other than traditional banking”:
RYAN: I think we should have the same rules apply to everybody else. We should make sure you can’t get too big where you’re going to become too big to fail and trigger a bailout, and if you take risky behavior then you go into bankruptcy and we open up the bankruptcy laws to allow them to go into bankruptcy. And more importantly if you’re a bank and you want to operate like some non-bank entity like a hedge fund, then don’t be a bank. Don’t let banks use their customers money to do anything other than traditional banking. Those to me are the key tenets of reform which we did not see happen.
A proposal doing almost exactly that — known as the Volcker Rule, after former Federal Reserve Chairman Paul Volcker — was part of the Dodd-Frank financial reform law and has been opposed by most Republicans in Congress. The Volcker Rule largely bans banks that are backed by taxpayers from engaging in risky proprietary trading, limiting such activity to hedge funds and institutions that are not federally insured. With the Volcker Rule in effect, banks would either give up the sort of trading that played a major role in the financial crisis or forfeit their access to the Federal Reserve’s emergency lending and the FDIC’s backing.
While Ryan talks like someone who wants to rein in Wall Street at town hall meetings, it isn’t always the game he plays in Washington. Ryan opposed Dodd-Frank, and his biggest backer is the financial industry, which has had so much success lobbying to water down the rule that not even Volcker himself is satisfied with it anymore.