Volcker Rule

FOR MONTHS, former Federal Reserve chairman Paul Volcker has been advocating a far-reaching repair plan for Wall Street: to re-draw the line between commercial and investment banking. Since the repeal of the New Deal-era Glass-Steagall Act in 2000 (and even, to a large extent, before that) deposit-taking institutions have been allowed to make money not only the old-fashioned way -- lending it out at interest -- but also by running hedge funds and other speculative means. Mr. Volcker argued that, since their deposits are federally insured, the big banks...

With his chronically gravelly voice and relentlessly liberal agenda, Sherrod Brown seems to have stepped out of "Les Miserables," hoarse from singing revolutionary anthems at the barricades. Today, Ohio's senior senator has a project worthy of Victor Hugo — and of conservatives' support. He wants to break up the biggest banks. He would advocate this even if he thought such banks would never have a crisis sufficient to threaten the financial system. He believes they are unhealthy for the financial system even when they are healthy.

ENACTED IN 2010 as part of the Dodd-Frank financial reform law, the " Volcker Rule " bans commercial banks from speculating in hedge funds and the like. The purpose, according to its eponymous advocate, former Federal Reserve chairman Paul Volcker, is to prevent banks from taking excessive risks with the funding advantage federal deposit insurance gives them. Such "proprietary trading," Mr. Volcker argued, destabilized the entire financial system for the sake of nothing more than bank profits and trader bonuses.

A day after New Year's in 2008, Citigroup announced that one of its most troubled units had a new chief operating officer : Jack Lew. In a sea of Wall Street traders and hedge fund managers, Lew stood out. He was a career government bureaucrat who had joined Citigroup 18 months earlier hoping to gain experience in the business world. Now he was getting more than he could have imagined. In the following months, as the entire bank teetered, Lew's group would cope with massive losses, lawsuits from...

FEW RULES COULD be clearer, in theory, than "Thou shalt not kill. " Yet even that commandment is subject to interpretation and exceptions (war, self-defense). And so the history of law-making is studded with well-meaning prohibitions — Prohibition itself, to name one — that were straightforward in principle but rather more complicated and occasionally unworkable in practice. Is the Volcker Rule the latest example? When enacted in 2010 as part of the Dodd-Frank financial reform law, the rule was intended to ban commercial banks from...

Washington policymakers should tighten the Volcker rule's ban on banks' speculative trades by reining in an exemption for hedging activity, former U.S. bank regulator Sheila C. Bair said Thursday. Speaking at a roundtable hosted by the U.S. Commodity Futures Trading Commission, the former chairman of the Federal Deposit Insurance Corp. said that exemptions to the Volcker rule should be strictly defined and that banks should have to publicly disclose their hedges. "I would tighten the rule," she said.

Nearly two years after the signing of a major law to boost oversight of Wall Street, two Democratic senators are calling on President Obama to speak out even more strongly in favor of a new federal rule that they say should have banned the trading that led to JPMorgan Chase's $2 billion or more loss. But Obama is in a difficult spot. Although he introduced and supports the Volcker Rule, which bans banks from gambling with their own money, regulators have yet to finish writing the rule and haven't...

For much of last year, Paul Volcker wandered the country arguing for tougher restraints on big banks while the Obama administration pursued a more moderate regulatory agenda driven by Treasury Secretary Timothy F. Geithner . Thursday morning at the White House, it seemed as if the two men had swapped places. A beaming Volcker stood at Obama's right as the president endorsed his proposal and branded it the "Volcker Rule. " Geithner stood farther away, compelled to accommodate a...

A new federal rule aimed at limiting risky behavior by banks is prompting protests from local and foreign governments alike, which warn it could make it harder for them to borrow money for public projects and operations. State and local officials say the new regulation, known as the Volcker Rule , could make it more expensive for them to raise money from investors to pay, for instance, for environmental cleanup and housing assistance. In the Washington area, the rule could affect...

Federal regulators unveiled a 298-page draft Tuesday outlining new rules to prevent big banks from trading for their benefit rather than on behalf of customers, nearly two years after the Obama administration endorsed such a measure. The "Volcker Rule," named after former Federal Reserve chairman Paul Volcker, would forbid banks from owning hedge funds and private-equity funds and prohibit them from making certain kinds of trades merely for their profit. It was...

Whatever chance Wall Street had of seeing the Dodd-Frank financial reform law dismantled died with Mitt Romney's election-night concession speech. The Republican nominee railed against the far-reaching legislation, promising to repeal it once he took office. But with President Obama clinching a second term, analysts say the financial services industry must come to terms with the fact that Dodd-Frank will become firmly entrenched. "Obama has the election behind him and the worry about alienating...

Democratic lawmakers on Thursday criticized regulators for taking too long to finalize the Volcker Rule, a controversial provision passed in 2010 aimed at restricting banks from making risky investments with their own money. People familiar with the matter say a rift has developed between bank regulators and the nation's top markets regulator over how the rule should be shaped. That could delay a final draft beyond the end of the year, an informal deadline set by the Obama administration, those people said.

The biggest U.S. banks have released their latest quarterly financials, and the results for the third quarter were, well, so-so. Shares of major financial companies are up a meager 1.2 percent since the start of earnings season. But that "meh" picture of the health of the major banks masks some deep turmoil within. And what the reports have in common is that they show how the biggest global banks still haven't figured out what their business should be in a post-crisis world. The headlines during the...

The limits of regulation are well known to Gary Gensler. As a core member of President Bill Clinton's Treasury Department, Gensler, with his colleagues, leapt to transform the financial markets through legislation, in the wake of an Asian currency crisis that threatened the global financial system. Years later, they realized they had made some flawed assumptions. "Looking back now, knowing what we know now about the markets as they developed, those of us that were involved in the late '90s ought to have done more to protect...

IT'S BEEN ABOUT a month since JPMorgan Chase, the nation's largest commercial bank, announced a $2 billion loss in a dubious series of trades that were supposed to hedge against risks. The embarrassment for the bank and its chief executive, Jamie Dimon, was acute: Mr. Dimon had not only previously dismissed concerns about the bank's activities as "a tempest in a teapot," but he had also opposed efforts to regulate such trades more tightly, arguing that restrictions would do more harm than good.

Washington policymakers should tighten the Volcker rule's ban on banks' speculative trades by reining in an exemption for hedging activity, former U.S. bank regulator Sheila C. Bair said Thursday. Speaking at a roundtable hosted by the U.S. Commodity Futures Trading Commission, the former chairman of the Federal Deposit Insurance Corp. said that exemptions to the Volcker rule should be strictly defined and that banks should have to publicly disclose their hedges. "I would tighten the rule," she said.

Democratic lawmakers on Thursday criticized regulators for taking too long to finalize the Volcker Rule, a controversial provision passed in 2010 aimed at restricting banks from making risky investments with their own money. People familiar with the matter say a rift has developed between bank regulators and the nation's top markets regulator over how the rule should be shaped. That could delay a final draft beyond the end of the year, an informal deadline set by the Obama administration, those people said.

FEW WALL STREET institutions enjoy greater prestige than JPMorgan, whose $2.3 trillion in assets make it the largest U.S. commercial bank. Jamie Dimon , the 56-year-old chief executive, is an industry hero for building a "fortress balance sheet" and steering JPMorgan through the mortgage meltdown relatively unscathed. Of late, Mr. Dimon has been deploying his influence to resist tighter federal bank regulation — specifically, the "Volcker rule," a provision of the 2010 Dodd-Frank law...

JPMorgan Chase has spent upward of $20 million on lobbying and campaign contributions in the past three years. On Tuesday, the bank received a healthy dividend on that investment. Its chairman, Jamie Dimon, has admitted that the firm was "sloppy" and "stupid" in making trading bets that lost $2 billion. But Republicans on the Senate Banking Committee wouldn't hear of it; they preferred to blame government. As the panel held the first hearing on the JPMorgan losses, Sen. Richard Shelby (Ala.)

Nearly two years after the signing of a major law to boost oversight of Wall Street, two Democratic senators are calling on President Obama to speak out even more strongly in favor of a new federal rule that they say should have banned the trading that led to JPMorgan Chase's $2 billion or more loss. But Obama is in a difficult spot. Although he introduced and supports the Volcker Rule, which bans banks from gambling with their own money, regulators have yet to finish writing the rule and haven't...