Key Post-Crisis Banking Rule Faces Big Changes

(From The Washington Examiner)

A major post-financial crisis rule meant to curb excessive risk-taking by banks faces major changes in the months ahead.

Legislators and federal regulators from both parties favor revising the Volcker Rule to lessen the regulatory burdens on banks and free up lending. But Wall Street critics fear that even modest new accommodations for banks will set a precedent that allows big banks to return to big speculative bets, subsidized by taxpayers.

The Volcker Rule, named for former Federal Reserve Chairman Paul Volcker, prohibits banks from engaging in proprietary trading — that is, trading for their own profits the way that hedge funds or day traders do. It was a centerpiece of the 2010 Dodd-Frank financial reform law, implemented on the logic that banks should not be speculating with deposits that are insured by the federal government. Otherwise, taxpayers effectively would be subsidizing banks’ bets.

Next week, the House is set to vote to exempt community banks from the rule. The legislation already passed the Senate in a bipartisan vote and is expected to garner similar support in the House before heading to President Trump’s desk.

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