The Dodd Frank financial reform and consumer protection act had three core goals:
- Prevent financial crashes, Wall Street bailouts and another Great Recession;
- Protect consumers and investors from being ripped off; and
- Refocus finance back to funding the real economy, supporting jobs, growth and prosperity, not high risk, socially useless activities to boost their bonuses
The Volcker Rule bans proprietary trading, which basically prohibits banks from making usually very big bets often with taxpayer backed deposits to boost their bonuses. The Volcker Rule thereby facilitates achieving all three core goals by stopping high risk gambling that threatens banks’ capital cushions, by reducing their anti-consumer predatory behavior, and by decreasing the socially useless trading culture that corrupted Wall Street’s biggest banks.
As evidenced by Wall Street’s increase in lending to the real economy and its decrease in trading activities, the Volcker Rule is clearly working. Nevertheless, the Federal Reserve and the other four agencies responsible for oversight and compliance of the Volcker Rule are proposing to weaken it, ostensibly to “simplify and tailor” its compliance requirements. We will be substantively responding to that proposed rule when appropriate.
However, there is a threshold issue that must first be addressed: the grossly inadequate time provided for the public to comment on the proposed changes. The five regulatory agencies seeking to roll it backthe Volcker Rule have limited public input to just 60 days, which denies the public an adequate opportunity to provide meaningful input. That’s why Better Markets, along with Public Citizen, the Center for American Progress, and American for Financial Reform, sent a letter to the five agencies calling for a 90-day extension to the comment period.
The Volcker Rule prevents Wall Street’s biggest taxpayer-backed banks from gambling with insured deposits, destabilizing the financial system and failing or requiring bailouts. The public, therefore, has a very significant interest in ensuring any changes to the Volcker Rule are done right, based on robust, independent data, and has sufficient safeguards.
Additionally, the complexity and the length of the proposed changes which run 689 pages and includes 342 specific questions, dozens of additional questions on the costs or benefits of aspects of the proposal, and invitations to comment on numerous technical concepts and provisions, demands that additional time be provided. After all, the original Volcker Rule was drafted, debated, and ultimately approved during a lengthy process that spanned more than three years. To now consider changes that would radically alter such an important financial protection in a mere fraction of that time denies the public a fair opportunity to participate in the comment process and violates the Administrative Procedures Act.
Simply stated, a 90-day extension for the public to comment on such an important revision to such an important rule is the least the financial regulatory agencies can and should do. We and our allies will be pressing the agencies to extend the comment period and provide the public with an appropriate amount of time to have input.