STATEMENT: Gutting the Volcker Rule Will Generate More Risk in the Banking System, CAP’s Gregg Gelzinis Says
Washington, D.C. — Today, the Federal Deposit Insurance Corp. was the first of five agencies to approve a final rule that would significantly alter the Volcker rule. Gregg Gelzinis, policy analyst for Economic Policy at the Center for American Progress, released the following statement:
The Volcker rule was established to reorient banks toward serving businesses and households instead of taking swing-for-the-fences trading bets with taxpayer-backed deposits. Today’s finalized revisions to this pillar of financial reform severely undermine that core principle.
The final rule narrows the trading activity covered by the Volcker rule and waters down or eliminates critical regulatory protections designed to prevent banks from abusing exemptions for hedging, market-making, and other permitted activities. As a result, Wall Street banks will be able to exploit these changes and engage in the type of high-risk proprietary trading that the Volcker rule was explicitly intended to prohibit. The revisions represent a forceful endorsement of the dangerous philosophy of Wall Street self-regulation.
Gutting the Volcker rule will generate more risk in the banking system, just as other deregulatory changes to capital requirements, liquidity rules, stress tests, and living wills would weaken banks’ ability to safely handle risk. Taxpayers, workers, and families will again foot the bill when this toxic mix goes south.
Related resource: “Hollowing Out the Volcker Rule: How Regulators Plan to Undermine a Pillar of Financial Reform” by Gregg Gelzinis
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