The Dodd-Frank financial reform legislation of 2010 stipulates that banks and the corporate entities that own banks should get out of the business of “proprietary trading…”
Such bets have the potential to break a bank, creating either an unacceptable liability for taxpayers or a serious risk to the financial system, or both. They also often put these megabanks in the conflicted position of betting against their customers.
The regulators involved in drawing up the rules… still not been able to complete the rules, in part because, as with anything to do with modern finance, the details are complex. The draft regulations and explanations run 116 pages in the Federal Register…
I remain pessimistic that regulators will adopt a strong final Volcker Rule in the near term, partly because of recent disclosures about the efforts of Senator Scott Brown, Republican of Massachusetts, to blunt the impact of the rule, and what these activities tell us about the November elections.