The controversial Volcker rule that regulates proprietary trading came in for a final round of comment as frustrated bankers, anti-Wall Street activists and Paul Volcker himself flooded government regulators with last-minute statements before the deadline Monday at midnight.
The crushing volume of the statements, at nearly 15,000 as of Tuesday morning on the Securities and Exchange Commission’s comments page, may have come as a surprise, though the passionate commentary did not, considering that the Volcker rule has drawn more heated debate than just about any other element in the Dodd-Frank financial reform act.
“I’ve never seen a rule-making response like this before,” said Derek M. Bush, a partner at the law firm Cleary Gottlieb, in an interview with The New York Times’ “Deal Book” blog.
In a comment that typified the frustration of the banking sector, Edward O’Keefe, executive vice president and general counsel for the Bank of America, warned that despite the SEC and other federal agencies’ effort to hammer out a workable rule, the Volcker proposal is rife with unintended consequences, many of which would undermine the safety and soundness of U.S. banking entities and U.S. financial stability if left unaddressed.
“We expect that additional unintended consequences for the products and services we provide to our customers will be revealed as we continue to assess the complex and extraordinarily far-reaching impact of the Volcker rule’s prohibitions on proprietary trading and sponsoring or investing in what the proposal deems to be ‘hedge funds’ and ‘private equity funds,’” O’Keefe wrote.
The Securities Industry and Financial Markets Association also joined in the outcry against what it considers to be narrowly defined permitted activity, which draws “the wrong line” between proprietary trading and market making.