The Volcker Rule of the Dodd-Frank bill is scheduled to go into effect on July 21,2012, although almost no one believes that the federal agencies will have finalized the necessary rules prior to that time. This much debated legislation still hasn’t been finalized over two and a half years after a public endorsement by President Obama. A group of very dedicated individuals have been working tirelessly to ensure necessary protections – Occupy the SEC. Occupy the SEC is a group of OWS activists, financial professionals, lawyers, and concerned citizens who read through the Volcker Rule draft line-by-line. They submitted a public comment letter responding to 244 of the 395 the questions the regulators have posed about the Volcker Rule.
The Volcker Rule is a specific section of the Dodd–Frank Wall Street Reform and Consumer Protection Act originally proposed by former United States Federal Reserve Chairman Paul Volcker to restrict United States banks from making certain kinds of speculative investments that do not benefit their customers. Volcker argued vigorously that since a functioning commercial banking system is essential to the stability of the entire financial system, for banks to engage in high-risk speculation created an unacceptable level of systemic risk. He also argued that the vast increase in the use of derivatives, designed to mitigate risk in the system, had produced exactly the opposite effect.
Just this week the Wall Street Journal published an article by Roger Vasey, formerly with Merrill Lynch, endorsing the Volcker rule. Surprisingly, former Citigroup CEO John Reed submitted a letter to the Securities and Exchange Commission saying that the rule does not go far enough.
The bottom line is that without regulation to ensure that institutions assume all of the losses of their speculative investments, we do not have capitalism. Years after the collapse of our financial sector, this simple concept still is not implemented through regulations. In addition, there is not even any talk on the horizon about breaking up the too big to fail (and apparently too big to regulate) banks. As voters, we have to know that the people we are electing in November will end this kind of stupidity.