Senate Dems to regulators: Proposed Volcker changes go too far

WASHINGTON — Thirty-one Senate Democrats on Thursday blasted regulators' efforts to ease the Volcker Rule, saying their proposed revisions would “undermine a fundamental provision" of the Dodd-Frank Act.

The banking agencies proposed changes in May to clarify what positions are still allowed under the proprietary trading ban, among other changes. They stressed that the core limits established in the statutory provision first proposed by former Federal Reserve Board Chairman Paul Volcker would remain intact. Volcker himself said in a statement that he welcomed "the effort to simplify compliance."

But the Democrats led by Sens. Jeff Merkley of Oregon and Jeanne Shaheen of New Hampshire countered that the proposal went too far. Merkley was one of two senators who had authored the original provision added to Dodd-Frank.

Andrew Harrer/Bloomberg

“The proposed rule issued by the federal banking regulators is not a minor change or an attempt to cut red tape for community banks and credit unions,” they said in a letter to the heads of the Fed, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Securities and Exchange Commission and Commodity Futures Trading Commission. “Instead, it creates potentially major loopholes for Wall Street banks to avoid complying with a core protection put in place by Congress to protect taxpayers and investors.”

The agencies issued the proposal after President Trump had already signed a bipartisan regulatory relief bill that exempted banks with assets of less than $10 billion from the trading ban.

The proposed changes included new definitions and categories regarding permissible trades. Banks with consolidated gross trading assets and liabilities starting at $10 billion would be required to have a "comprehensive compliance program," while firms with “limited” trading activities of less than $1 billion would effectively be deemed in compliance with the rule.

Another significant proposed change would eliminate the "60-day rebuttable presumption." The current rule prohibits trades of positions that a bank holds for 60 days or less, with the idea that such short-term holdings represent the kinds of activity the rule was intended to discourage.