Frank Sees 'Tougher' Volcker Rule, Calls for Lenient Enforcement

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  • "I don’t know that we’ll get there by the end of the year," Philadelphia Fed President Charles Plosser said Monday, becoming the latest official to warn that regulators may not be able to finalize the Volcker rule by the much-promised deadline.
    November 18
  • Receiving Wide Coverage ...Holiday Reading: The long-simmering battle between five federal agencies over the Volcker Rule appears to be in its final stage. The current draft is around 1,000 pages, and it's expected to be finalized before the end of the year. The basic dynamics here — with the Fed and the SEC pushing for looser restrictions, while the CFTC seeks tighter rules — are old news. But the New York Times has a detailed look at some of the places where the agencies remain at odds, including the draft language defining market-making. The Times also reports: "Since the Volcker Rule was first proposed in 2011, regulators have had to contend with a fierce lobbying campaign by the banks. But that effort lost momentum last year, after JPMorgan's trading debacle revealed that its traders were placing enormous speculative bets under the guise of hedging." Meanwhile, the Financial Times reports that the Fed is considering giving banks until July 2015 to comply with Volcker's new restrictions.
    November 18
  • SEC Chairwoman Mary Jo White said Tuesday that regulators could "maybe" finalize the much-delayed ban on proprietary trading by the expected year-end delivery date. But she refused to commit to the deadline and warned that the rule's "complexities make it difficult" to finalize.
    November 12
  • Throughout his three decades in Congress, Barney Frank reached across the aisle to tackle big problems, and crafted groundbreaking legislation with far-reaching effects for banks.
    November 28

Barney Frank, one of the architects of the Dodd-Frank Act, called Friday for both stringent standards and lenient enforcement around the financial reform law's much-watched Volcker Rule.

The provision, once finalized, "will be tougher than many of the people in this room would like to see, but I do not think it will interfere with the function of the economy," said Frank, the former chairman of the House Financial Services Committee, who retired from Congress last year.

Still, Frank said that regulators should go easy on banks learning how to comply with the provision's restrictions on proprietary trading and investment in hedge funds.

"When you get the Volcker Rule, there ought to be a very important enforcement principle: the first time an institution does something that their own regulator believes is in violation of the Volcker Rule, the response should be, 'Don't do that again.' No penalty," Frank said in a Q&A presentation with Politico's Ben White, during The Clearing House's annual conference.

"There are a lot of concepts in the law, very important concepts, where they state the principle and it gets meaning as it is regulated," Frank added.

Banks have spent three years trying to soften the impact of the Volcker Rule, which has already caused many companies to shut down once-lucrative proprietary trading operations. But the ongoing delays in the rule's implementation has frustrated the White House, regulators and even some bankers who are looking for certainty and clearly defined guidelines about what activities they will and will not be allowed to do once the rule is implemented.

"It has to get done," Bank of America (BAC) Chief Executive Brian Moynihan told American Banker on Thursday, after a panel discussion at the conference.

Moynihan declined to predict whether or not the Volcker Rule would be finalized by the White House's much-desired year-end deadline: "Ask them," he said, referring to the five regulatory agencies in charge of approving the rule.

Some officials from those agencies, including Securities and Exchange Commission Chairwoman Mary Jo White and Philadelphia Federal Reserve President Charles Plosser, have in recent days expressed skepticism about regulators' ability to release a final rule by the end of the year.

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