The Volcker Rule, Bipartisan Progress, and a Chance of Snow
Senate Banking Committee Chairman Chris Dodd (D-CT) and Ranking Member Richard Shelby (R-AL) continue to work towards bipartisan agreement on at least some key elements of a financial reform measure. While the process has been a rocky one, both Senators appear to be working hard to find common ground. They appear to have found agreement on at least two things:
1. There will NOT be a stand-alone Consumer Financial Protection Agency. Rather, consumer protections functions will be folded into another agency or agencies.
2. The president's proposal to limit the size of financial institutions (the "Volcker rule") has complicated the process and may have come too late in the game.
Our contacts on the Hill are telling us to expect committee action on a financial reform package by the end of the month. Regardless of the final outcome of the Dodd-Shelby discussions, the Chairman appears committed to moving ahead.
The "Volcker Rule" debate has created new complications and new energy behind industry lobbying. It has not been uncommon in recent weeks to see the CEO's of major banks visiting key Senators -- not just their lobbyists.
Ex-Fed Chair Paul Volcker himself testified this past Tuesday about the need for heading off the "too big to fail" phenomenon. Volcker asserted that the federal government – through its role as bank deposit insurer – is ultimately providing taxpayer protections for the speculative activities of commercial banks, or those activities that go beyond a bank’s “essential function in the economy.” The second part of the president’s proposal would limit over-leveraging among large financial institutions by placing caps on the market share of an institution’s liabilities, a move that Volcker says will supplement proposed regulations to enhance capitalization requirements and help eliminate “too-big-to-fail” institutions.
Although Dodd is a strong supporter of the Volcker rule, he and Shelby have been united in criticizing the proposal’s timing, raising serious doubts as to whether its inclusion into the broader financial reform legislation is possible considering the shortened timelines for debate.
Stay tuned -- by the time Washington digs out from the next snowstorm there should be further news.
Has any politico mentioned the role more pervasive XBRL and iXBRL could play in this reform effort?