What’s Behind Door #3?
Dodd-Frank includes provisions to ban proprietary trading by banks and large financial institutions, also commonly known as the Volcker Rule. Sounds simple enough until you read the fine print. Right?
Well imagine buying a car and the dealership is still writing up the fine print as they are handing you the keys to the car. It gives you an idea of the process regulators are pushing forward with on the Volcker Rule.
The proposed Volcker Rule was first leaked and then released in October, but not officially published in the Federal Register until November 7th. The comment period closes on January 13, 2012. The Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Securities and Exchange Commission jointly released the rule, but the CFTC took a pass. The Chamber on October 11, 2011 wrote to Secretary Geithner, asking him to use his powers as a member of the Financial Stability Oversight Council to get the regulators on the same page.
To date, the CFTC has still not issued its portion of the Volcker Rule. What does that mean? Plenty.
Many businesses, financial and non-financial, that thought they were exempt from the Volcker Rule, are slowly discovering that they may have to comply with certain aspects of the proposed implementing regulations. To take but one example, non-financial firms use derivatives as a crucial risk-mitigation tool—these vehicles are essential to ensuring predictable costs. Yet, under the regime envisioned by the Volker Rule Proposal, it is not clear whether and how the liquidity of the derivative markets– and, hence, their ability to enter into risk-mitigating swaps -- will be affected.
Also, the Volcker Rule, spanning 300 pages and 1,000 questions has a 90 day comment period, but other less complex regulations, such as Coast Guard regulations on passenger vessels under 100 tons, have had a 150 day comment period.
Not being able to determine if you fall under the scope of the rule and not having the time to analyze it or comment on it is not a recipe of fairness.
That is why the Chamber today wrote to the regulators asking them to withdraw the proposed Volcker Rule regulations and re-propose them at a time when all of the regulators can put all of their cards on the table. We also asked that they give all stakeholders 150 days to study the proposal and give agencies the benefit of their thoughts.
Who knows the CFTC may actually come out with something to make it better.
Making sure our businesses have access to capital is instrumental to creating the 20 million jobs we need over the next decade. Monty Hall had fun duping game show contestants but the fundamental fairness and evenhandness we are asking for isn’t a laughing matter.
[Photo via Wikimedia Commons.]