Bartlett Naylor co-authored this blog post with Amit Narang.
After two years of studying the proposed Volcker Rule, with 20,000 comments from bankers and the public, hundreds of meetings with Wall Street lobbyists, and 18 months past the rule’s congressionally mandated deadline for enactment, we’re now being told by the American Action Forum (AAF) — a self-described “center right policy institute” — that this was a rush job.
The Volcker Rule figures as a hallmark in the 2010 Dodd-Frank Wall Street Reform Act. It prohibits proprietary trading — gambling — by federally insured financial institutions.
The Volcker rule is about the worst example AAF could have come up with of a so-called rushed rulemaking. The simple and demonstrable truth is that our current regulatory process is far too slow and unwieldy to work effectively for the American public, and the Volcker Rule is the case in point.
Financial agencies missed deadline after deadline as they crafted the Volcker rule. Part of the delay was that they faced an unprecedented lobbying barrage from Wall Street to weaken the rule with loopholes or block it completely. So it is pretty incredible to see AAF try to re-write history and trick the public into believing that the regulators rushed this rule. AAF can distort the record and cherry-pick facts, but it doesn’t change the fact that, although the public and our economy are both far better off with the Volcker rule now in place, it took far too long.
The AAF adds that a new “administration” study reveals “annual” costs could approach $4.3 billion, proof that the regulators didn’t appreciate the ramifications of what they approved.
That $4.3 billion “annual” cost detailed in the administration study largely stems from the high end of losses the biggest banks might suffer shedding some of their high-risk assets, largely hedge funds. It is, in fact, a one-time cost, and the Office of the Comptroller of the Currency (OCC) estimates the cost in a range of $0 to $3.6 billion. The high end of the compliance estimate makes up the balance of the $4.3 billion.