BREAKINGVIEWS-Volcker Rule looks more like hype than future law
— The author is a Reuters Breakingviews columnist. The opinions expressed are his own —
By James Pethokoukis
WASHINGTON, Feb 15 (Reuters Breakingviews) – The much-hyped Volcker Rule proposal is failing fast in the U.S. Congress. Paul Volcker probably isn’t that surprised. The former Federal Reserve chairman joked he was “just a photo op”, even after President Barack Obama’s public embrace of his proposal to limit bank proprietary trading. The problem is that legislators are no longer interested in sweeping reform.
Any reform plan has to get through the U.S. Senate Banking Committee. Now that the mood of crisis has passed, Wall Street campaign contributions and Republican intransigence are paramount there. That means the new negotiating tag-team — Democrat Chris Dodd, the chairman, and Republican freshman Bob Corker — is not going to agree on anything radical. Corker says the Volcker Rule will not be a “major topic” for discussion, and that is probably OK with much of the committee.
Increasingly, the Volcker Rule looks more like a stunt than a viable solution. Though Volcker had been pushing it for months, the White House endorsement came as surprise to both the Banking Committee and banking industry. That is a poor way to introduce serious legislation in Washington.
Lame-duck Dodd sees reform as his legacy, so he wants a bill passed by early summer. His view: The Volcker Rule is a sudden and unwelcome complication.
Cynics always saw the Obama endorsement as no more than a populist, knee-jerk response to the Democrat’s loss of a Massachusetts U.S. Senate seat. Even some advocates of the Volcker Rule admitted the plan didn’t directly address the regulatory failures that contributed to America’s financial meltdown.
Even the administration did not seem really keen. The plan was introduced in January with great fanfare by Obama — Volcker standing prominently at his side. But Senate Democrats say the White House is actually spending its political capital on the creation of a new consumer finance regulator.
The occasional rhetorical gesture may suggest otherwise, but the Obama administration has scant interest in more extreme measures to limit the size of the banking sector or its activities. If Volcker harboured any small doubts about that, he shouldn’t any more.
— Bipartisan compromise talks resumed in the U.S. Senate over financial regulation reform, after an impasse led last week to a breakdown in negotiations. Senate Banking Committee Chairman Christopher Dodd, a Democrat, said he was talking with Republican Senator Bob Corker about drafting a bill that could gain wide support. Dodd had previously negotiated with Senator Richard Shelby, the committee’s top Republican, but they could not agree.
— Senators have been debating a crackdown on bank and capital market oversight for more than a year. The House of Representatives approved a bill in December, adopting many recommendations made by President Barack Obama in mid-2009. All House Republicans voted against the bill.
(Editing by Edward Hadas and David Evans)