by Tom Quaadman

In film noir movies, the ending usually comes around the time the protagonist is running from danger down a rain-swept, foggy, dark street. Ultimately the hero saves the day.

So what does the Volcker rule have in common with films such as D.O.A.?

The Chamber has opposed the Volcker Rule since it was first announced because it will put American financial services firms at a competitive disadvantage. By banning certain activities it will be more difficult for firms to be market makers and business will migrate overseas making it more difficult for capital formation to occur in the United States. Less capital formation means slower business expansion and fewer opportunities to create jobs.

Last week, a copy of a proposed regulation to enact the Volcker Rule was leaked to the press. In flipping through the Volcker Rule version of the Pentagon Papers it seemed that a disturbing picture was developing, but leaks are often as wrong as they are right.

Well today may be the start of the new week, but the fog around the Volcker Rule has become thicker than pea soup. A one-page summary analysis of the proposed rule shows that it raises many more questions than answers and seemingly did not address the potential adverse consequences to American capital markets. Also, the shades of gray fail to provide businesses with the certainty that flows from clear rules and procedures.

Furthermore, the Federal Reserve, FDIC, Comptroller of the Currency and SEC are in the process of issuing a 300 page rule proposal. However, the CFTC is not moving forward at the current time. So by the latest box score 4 of 5 regulators seem to be on the same page, but the fifth is a holdout.

While we can debate the merits of the Volcker Rule (and we will), it is imperative that the regulators be on the same page to provide some certainty to the marketplace. The Chamber sent a letter to the Treasury Department, in its role as Chairman of the Financial Stability Oversight Council requesting that it exercise its powers to ensure that regulators are coordinated and working in unison. A failure by regulators to sign off on a proposal can only mean continued uncertainty, an ongoing inability to properly plan for the long-term and consequently a lack of incentive to deploy capital.

There is an old saying that he who hesitates is lost. Well, it looks like the regulators just hesitated and it is the economy that will lose in the end.

In these uncertain times, our financial system is running down a dark foggy street. If there is a light at the end, is it up to Treasury to save the day, or are our competitors about to run us over?

Picture via Wikimedia Commons.