On Friday, the U.S. House of Representatives approved a bill known as the “Vocker Rule,” which gives the U.S. Federal Reserve the sole power to prevent banks from engaging in speculative trading.
Named after the former Federal Reserve chairman who served during the Carter and Reagan administrations, the bill won approval with a vote of 300-104. If enacted, the law would make the current rule easier to manage. As the bill received broad support from both parties, some believe that the House will eventually include the measure in a larger banking bill that the Senate has already approved.
The Volcker Rule was originally put into force a number years after the Dodd-Frank financial reform law was enacted, which addressed issues relating to last decade’s financial crisis. The rule prevents American banks from engaging in speculative transactions on their own account. It also prevents them from hedge fund investing.
Some executives in the banking industry maintain that the rule is not only too difficult to follow but that it is also very confusing, and that it further limits market liquidity.
The new law would give the Federal Reserve full authority to change the rule. Currently, five separate regulatory authorities must agree to a rule change. The other authorities include the Office of the Comptroller of the Currency, Commodity Futures Trading Commission, Securities and Exchange Commission and Federal Deposit Insurance Corp. A number of banks say that this requirement is largely unmanageable.
Jeb Hensarling, who runs the House committee that wrote the bill, said that the law will help make the rule more clearer. He says that — independent of how someone may feel about a particular regulation or rule — everyone can agree that they should be clearly understood and that they should be interpreted in only one way, and that they should be enforced by one single authority.
The bill still needs to be approved by the Senate and then it further needs the signature of President Trump.
Many big banks are in favor of the bill, and they hope that it may be included in the banking bill that the Senate recently passed, which eases various banking regulations. This bill is still pending in the House, but Hensarling indicated that the Senate version of the bill still needs changes.