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April 8, 2014

FED GIVES BANKS 2 MORE YEARS ON RISKY SECURITIES

“The Federal Reserve is giving U.S. banks two more years to ensure their holdings of certain complex and risky securities don’t put them afoul of the new Volcker Rule.

“The Fed’s move announced Monday didn’t give banks an outright exemption for the securities from the Volcker Rule’s ban on high-risk investments. Wall Street banks had sought an exemption and the leading Wall Street lobbying group expressed disappointment with the Fed’s move.

“The Volcker Rule, adopted in December, is intended to limit banks’ riskiest trading bets that could implode at taxpayers’ expense. That kind of risk-taking on Wall Street helped trigger the 2008 financial crisis. Congress mandated the Volcker Rule in its financial overhaul law.”

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“Dennis Kelleher, the president of Better Markets, a group that advocates strict financial regulation, said many of the securities in question will mature in a few years so banks won’t have to sell them to comply with the rule.

“The banks’ lobbying for an outright exemption “was just a Wall Street politically manufactured issue,” Kelleher said. He called the Fed’s action “a pretty narrow tweak” applied to a specific type of security.”

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Read full Associated Press article here.

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