Bank regulatory reform is heading toward misguided re-engineering as legislators seek the wrong answers to the wrong questions. Both the highly publicized Volcker Rule and a more obscure proposal to treat intercompany swap transactions as credit exposure are examples of misplaced concerns.

Confining bank trading activity to hedging, market making or customer facilitation — or to further restrict derivative transactions whose purposes may fall within those categories — does not address the fundamental problems of our banking system.

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