WASHINGTON, March 3 (Reuters) – The Obama administration reasserted its commitment to banning proprietary trading by banks with draft legislative language on Wednesday, despite signs that the U.S. Congress is unlikely to adopt such a rule.
In a scant five pages from the Treasury Department, the administration put a two-year phase-in on its “Volcker rule” to curb “prop trading” — or buying and selling of investments on financiers’ own books unrelated to customer needs.
The rule would apply to banks, with limits slapped on large, non-bank financial firms, as well. In addition, banks would be barred from sponsoring or investing in hedge funds and private equity funds, under the administration’s language.
While key details were left up to regulators, the language showed the White House is determined to push ahead with a rule it first proposed in January, as the U.S. Senate inched its way toward acting on new financial reform legislation.
Authored chiefly by White House economic adviser Paul Volcker, the rule arrived late in a reform debate that has raged for months since the severe 2008-2009 financial crisis tipped the U.S. economy into a deep recession.