|
||||
|
|
||||
|
|
Volcker Rule3/4/10 - Obama's push to limit, or in some cases ban, certain risky trading activities at financial companies also would affect companies that don't own bank subsidiaries.The President proposed the 'Volcker Rule,' named after former Federal Reserve Chairman Paul Volcker, in January as the administration sought new ways to crack down on risk and size at financial companies. The White House wanted to prevent companies with federally insured deposits from engaging in 'proprietary trading,' or taking speculative trading bets with the company's own money. Volcker believed allowing banks to engage in this type of risky trading could cause a financial crisis in the future. The White House initially offered few details for how the 'Volcker Rule' would work. And Senate lawmakers are expected to water down the Volcker Rule by giving more discretion to regulators on how best to enforce size and risk limits at banks. Proposal drafts indicate that the government wants to bring more federal scrutiny to any 'major' financial firm, even those that aren't banks, which engage in proprietary trading. These companies would face tougher capital and liquidity rules and also be forced to 'provide more information to the market about their risks.' The White House's proposal also would ban financial companies from controlling more than 10% of the liabilities of the financial system after an acquisition. This updates an older law that restricts banks from controlling more than 10% of U.S. deposits after an acquisition. The White House's new proposal could make it much more difficult for large banks and other financial firms to grow. Among other things, the White House's proposal would prohibit banks from investing or sponsoring hedge funds and private-equity firms. Banks would be able to act as investment advisers to private equity funds but wouldn't be able to lend or provide prime brokerage services to these companies. |
|
||