Obama Said to Send Volcker Rule Proposal to Congress
March 3 (AP) - President Barack Obama plans to send Congress as soon as today “Volcker Rule” language to impose strict limits on banks’ size and proprietary trading, according to two people briefed on the proposal.
Obama will ask lawmakers to bar banks from trading solely for their own profit and limit company size by expanding a 10 percent cap on deposit share to include other funding sources, according to a draft summary. It also would tighten supervision and capital and liquidity requirements on non-bank companies engaged in proprietary trading, according to the summary.
The draft summary, prepared by the Treasury Department to accompany the legislation, isn’t final and could be changed, according to the people who declined to be identified because planning isn’t complete. Treasury spokesman Andrew Williams had no comment on the summary.
Obama asked Congress in January to adopt the Volcker Rule to restrict risk-taking after financial companies reported more than $1.7 trillion in writedowns and credit losses after the subprime mortgage market collapsed in 2007. Lawmakers including Senate Banking Committee Chairman Christopher Dodd have called the plan a political ploy and said it could complicate efforts to overhaul rules governing financial companies.
The president’s proposal would bar banks from owning or controlling hedge funds and private-equity firms, according to the summary. Banks also would be barred from acting as a prime broker to hedge funds they advise.
The proprietary trading restrictions wouldn’t affect market-making or hedging activities related to customer business, according to the summary.
House, Senate
The House of Representatives in December passed regulatory- overhaul legislation including Pennsylvania Democrat Paul E. Kanjorski’s plan giving regulators power to require companies to divest businesses deemed systemically risky. The Obama proposal would require regulators to break up those companies.
Dodd, a Connecticut Democrat, is negotiating with Republican senators aiming to reach bipartisan compromise on measures guarding against potential threats to the U.S. economy and resolving systemically important companies when they fail.
In a hearing last month, Dodd said the Obama administration proposal, named for former Federal Reserve Chairman Paul Volcker, was viewed by some lawmakers as “transparently political and not substantive.”
Obama outlined the proposal Jan. 21 alongside Volcker, who has advocated restrictions on banks to limit risks after the U.S. government set aside $700 billion in 2008 to bail out companies including Citigroup Inc. and Bank of America Corp.
AP
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