Lobbyists continue to battle the Volcker Rule that would bar banks from the hedge fund industry

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Financial industry lobbyists continue to battle a bill that would bar banks from the hedge fund industry.   Even though, some of the bill’s Republican opponents acknowledge that it will pass in some form.

The bill proposed by Democratic U.S. Senator Christopher Dodd includes a provision permitting regulators to implement so-called “Volcker rule.”  The Volcker rule was suggested earlier by former Federal Reserve Chairman Paul Volcker.   It includes provision barring banks from proprietary trading or from mergers that would give them more than a 10% share of the U.S. banking system.   As the result, the Volcker rule would forbid bank holding companies from owning, sponsoring or investing in hedge funds.  

The bill passed the Senate Banking Committee on Monday, March 22, 2010 without any Republican support.    Despite the setback, lobbyists are urging lawmakers to leave out the final decision about whether to adopt the Volcker rule.

According to various news sources, Scott Talbot of the Financial Services Roundtable told Bloomberg News that “we believe the regulators should have the discretion to deal with the situation on a company-by-company basis.   You can’t have a blanket prohibition on proven risk-management techniques.”  “Our hope is that they change ‘must’ to ‘may,’” Talbott added.

However, that argument may not carry much weight with the Republicans.   The Dodd bill gives “too much power to the regulators,” Republican U.S. Senator Judd Gregg told Bloomberg. But both he and Republican Senator Bob Corker, who had been working with Dodd on a compromise bill, have expressed support for the Volcker rule provisions.   Also, both also say that a financial services reform bill will pass this year, potentially without Republican support.

Anna Timone (195 Posts)


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