Paul Volcker is expected to issue a comment letter to fire back at critics of the Volcker Rule.It’ll be a change of pace for the former Fed Chairman—in the past, many had portrayed the rule as so complex that even its namesake had been dissatisfied with it. Volcker told the New York Times back in October that he did not like the rule and it was too complex.
The rule, arguably the most controversial aspect of Dodd-Frank financial reforms, bans proprietary trading at banks and has drawn the ire of many bank officials, money managers and foreign governments.
But Volcker’s letter today is suppose to defend recent attacks on the rule—arguing that the rule’s effect to lessen liquidity in the market is a positive and that it will not restrict bank trading on foreign sovereign bonds, the WSJ reported, citing sources familiar with Volcker’s thinking.
The former Fed chairman also plans to push back on critics who claim proprietary trading didn’t play a role in the financial crisis, people familiar with his thinking said. Betting with a firm’s own money can cause employees to be more focused on individual profit than the well-being of clients, Mr. Volcker believes.
Mr. Volcker is expected to concede that the rule is complex, but that this is largely unavoidable, according to people familiar with his thinking. And some of the most complicated parts of the proposed rule were inserted at the request of banks, such as definitions of what kinds of trading positions will be labelled proprietary, these people said.
The comment deadline on the proposed Volcker rule set out by the Fed last October will end today, after being pushed back a month due to political and financial industry pressure. Goldman Sachs is also expected to drop a 50-page scather on the rule, according to Ben White at Politico.