“On Friday, the Federal Reserve delayed by two years compliance with the Volcker rule, the prohibition on banks’ proprietary trading—deals made to profit the bank instead of their clients. The postponement removes a key argument of those people who dismissed Congress’ Christmas gift last week to Wall Street, the elimination of Dodd-Frank Section 716.”

“Section 716 required commercial banks to push their riskiest swaps into separately capitalized subsidiaries—but Congress nixed it with a rider in its year-end budget bill known as the CRomnibus. Wall Street lobbied intensively for Section 716’s erasure, but even some of the finance industry’s toughest critics, like Paul Krugman, argued that substantively, it wasn’t that big a deal.”

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“To accomplish the latest two-year delay, the Fed had to break the spirit of the rules. The Fed is empowered under Dodd-Frank to delay regulations like the Volcker rule for only one year at a time. So in its announcement, the Fed both acted on a one-year delay to 2016, and also “announced its intention to act next year” on “an additional one-year extension.” It did not require banks to apply for the extension based on objective information about particular hard-to-unwind investments.”

“It is a troubling sign that the Fed granted a two-year blanket extension without requiring a public application, justification and determination establishing the basis for the failure to comply with the law,” said Dennis Kelleher of the financial reform group Better Markets in a statement.”

“You have to believe that it’s less a case of not being able to exit investments, and more a case of simply not wanting to. Banks lobbied the Federal Reserve for the extension because of the possibility of taking losses if they had to get out of the investments by next July, as scheduled. This “right to profit” doesn’t actually exist in any formal sense, but it often gets trotted out as a justification for a light regulatory touch on the banks.”

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Read the full New Republic article by David Dayen here.