Making a Theoretical Case About Volcker (New York Times)

An unusually large number of comment letters had been filed in response to the Volcker Rule by Monday, the deadline for responding to a draft of the rule that was outlined in October. But both supporters and critics have largely relied on arguments that — while sophisticated and technical — are merely theoretical. For example, in a 58-page, mostly critical letter, JPMorgan Chase claimed that the rule “would have serious, adverse effects on our ability to manage our risks and address the needs of our clients, and on market liquidity and economic growth.” While it does make plenty of detailed references to specific businesses at JPMorgan, the arguments lack quantifiable references. Letters from Credit Suisse, Morgan Stanley and Bank of America also had few fleshed-out examples from their own operations. Real-life numbers could inform a key debate over banks’ market-making business, in which they hold inventories of securities to facilitate customer trades.