– John Kemp is a Reuters columnist. The views expressed are his own –
By John Kemp
LONDON, March 16 (Reuters) – Paul Volcker’s proposed ban on banks’ proprietary trading or owning hedge funds or private equity funds has been unexpectedly revived in the financial regulation bill published by Senate Banking Committee Chairman Christopher Dodd yesterday.
The Volcker Rule’s surprise survival comes despite fierce opposition from the banking industry and after many commentators had written it off as a short-term political gimmick in the wake of the shock election defeat in Massachusetts. Dodd himself had appeared lukewarm.
In fact, Section 619 of the bill (“Restrictions on Capital Market Activity by Banks and Bank Holding Companies”) would give legislative effect to the proposals almost exactly as outlined by President Barack Obama at the press conference in January.
BANS ON PROP TRADING, HEDGE FUND SPONSORSHIP
Section 619 (b) instructs the new Financial Stability Oversight Council (FSOC) to issue rules that “prohibit proprietary trading by an insured depository institution, a company that controls an insured depository institution or is treated as a bank holding company”.