STATEMENT: Proposed Change to the Volcker Rule Is Another Recipe for Disaster

Washington, D.C. — Today, the Federal Reserve Board, Federal Deposit Insurance Corp., and Office of the Comptroller of the Currency issued a proposed rule that would roll back the Volcker rule’s restriction on bank investments in, and relationships with, hedge funds and private equity funds. Following the announcement of the proposed rule, Andres Vinelli, vice president of Economic Policy at the Center for American Progress, released the following statement:

Permitting taxpayer-backed banks to invest more heavily in certain types of highly risky private equity funds and hedge funds is a recipe for disaster. The Volcker rule was put in place to reorient banks away from risky speculative activities and toward responsible lending to businesses and households. President Donald Trump’s financial regulators have cast aside that core principle. In fact, this proposal deviates so significantly from the statute that it may well violate the law itself.

Injecting additional risk into financial institutions at the same time that other financial deregulatory initiatives have severely reduced banks’ ability to safely handle stress will be toxic for the stability of our banking system. Wall Street’s already substantial profits stand to benefit from this agenda, while the costs will be inevitably borne by taxpayers, households, and the broader economy.

For more information or to speak to an expert, contact Julia Cusick at [email protected] or 202-495-3682.