Center for American Progress

STATEMENT: CAP’s Andy Green on Fed’s Volcker Rule 2.0 Vote
Press Statement

STATEMENT: CAP’s Andy Green on Fed’s Volcker Rule 2.0 Vote

Washington, D.C. — Today, the Federal Reserve Board was the first of five agencies to issue a joint proposed rule that would substantially revise the Volcker Rule. Andy Green, the managing director of Economic Policy at the Center for American Progress, released the following statement:

The Volcker Rule seeks to establish the basic principle that banks are in the business of serving the real economy and out of the business of making swing-for-the-fences bets that enrich traders and executives but imperil financial stability and market competition.

Sadly, this Volcker 2.0 proposed rule appears to weaken rather than advance the implementation of that principle. The result will be more banks betting against, rather than serving, their customers. This will further concentrate the power of the largest banks in the markets at the expense of all other investors, and it will put the economy and taxpayers at greater risk of their failure.

There is little substantive justification for these proposed changes, as regulatory and academic analyses alike have demonstrated that the Volcker Rule has not impaired liquidity in U.S. capital markets. Indeed, lending and overall economic growth under the Volcker Rule have been robust. Before rewriting a rule that has been in effect and working for nearly three years, regulators should provide more transparency on the Volcker Rule’s implementation and enforcement; because the need is for more rather than less.

All of this comes at the worst possible time. As the economy moves into the late stages of the economic cycle, regulators should be on greater guard against risks building in the financial sector. Giving a green light to high-risk activities like proprietary trading and fund investing—while reducing capital requirements and loosening stress tests—is shortsighted and dangerous.

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For more information or to speak with an expert, contact Allison Preiss at [email protected] or 202.478.6331.