Saturday, December 20, 2014

Wall Street Gets Another Christmas Gift: Volcker Rule Delayed

Wall Street Gets Another Christmas Gift: Volcker Rule Delayed

Last week, the legislative branch gave Wall Street a present when it repealed a section of Dodd-Frank pertaining to derivatives.  This week, the executive branch delivered a gift when the SEC delayed implementation of the Volcker Rule until 2017.  The investment banks argue that they need more time in order to comply.  The rule is supposed to force the banks to divest their holdings of hedge funds and private equity.   Mr. Volcker’s reacted with appropriate criticism:

It is striking that the world’s leading investment bankers, noted for their cleverness and agility in advising clients on how to restructure companies and even industries however complicated, apparently can’t manage the orderly reorganization of their own activities in more than five years.  Or, do I understand that lobbying is eternal, and by 2017 or beyond, the expectation can be fostered that the law itself can be changed?[1]

The former Fed chairman is right.  The investment banks’ claim is ridiculous.  They’d restructure their private equity and hedge fund holdings within 90-days, if it were in their interest to do so.  Given their victory last week on Capitol Hill, I’m certain that they’re playing for time and will try to repeal the Volcker Rule in the next session of Congress.  They’ll probably succeed.


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