Paul Volcker still looms large literally and figuratively in finance, the 6′ 7″ former Federal Reserve Chairman’s proposed rules are as imposing in finance today, as he was during his career at the Federal Reserve Bank during the Carter Administration. As the Obama Administration and the S.E.C. have dramatically increased their efforts to regulate Wall Street risk taking–the push to restructure financial regulation has reached a tipping point, as the negotiations between the (5) five agencies that are coordinating in the writing the rules become more tense. The central tension in the debate on the rules circles around their rigidity and severity, the main focus of which is to ban banks from trading for their own gain and to eliminate bank participation in proprietary trading.
The Treasury Secretary Jacob J. Lew has been pushing the groups to complete the rules as he has pressure from President Obama, who is seeking to meet the initial compliance deadline of July 2014. Positioning and negotiations have thwarted a fast implementation as the various agencies have encountered tremendous lobbying from Wall Street. The significance of the negotiations serves to outline the Volcker Rule’s importance as a barometer for the strength of Dodd-Frank.
Analysts expect the Federal Reserve Bank to extend the compliance date for the Volcker Rule to July 2015 to give banks additional time to make the necessary effective changes. It is within the Federal Reserve Bank’s powers to delay compliance dates over one year increments to accommodate any unforeseen exogenous events, if a delay is forthcoming it will most likely be announced next month. Even if the compliance is delayed, banks would still need to eliminate pure proprietary trading desks by July of 2014. However, the banks will still be responsible for collecting data, making specific financial disclosures along with additional compliance measures in their systems. Experts expect the rules to be very stringent with tough reporting and trading limits. The top banks have already shut down their proprietary trading operations that they believe the law will eliminate.