Back in March, we wrote a blog about a headlining scandal that threw Goldman Sachs into courts against the then-recently-created Volcker Rule. Since then, not much has been said about the legislation, until this week, as regulators released a proposal that was, “so complex that banks blasted it as unworkable and consumer groups dismissed it as too weak.”
The proposal has received almost universal opposition, due mainly to the unacceptable level of complexity in the document. Reuters interviewed American Bankers Association Chief Executive Frank Keating for his opinion on the proposal:
"Only in today's regulatory climate could such a simple idea become so complex, generating a rule whose preamble alone is 215 pages, with 381 footnotes to boot…How can banks comply with a rule that complicated, and how can regulators effectively administer it in a way that doesn't make it harder for banks to serve their customers and further weaken the broader economy?"
Consumer interest groups like Americans for Financial Reform also commented in the article, suggesting that the rule heavily favors bank flexibility over consumer protection. Reuters quotes them as responding, "Unfortunately, the proposal issued today falls well short of what the Volcker Rule could and should achieve.”
Other opposition states simply that the rule would require too many banks to fracture into smaller businesses in order to remain competitive. Many analysts are predicting that companies and investors will both fight for the rule to be dampened in those areas.
The public has until January 13, 2012 to comment on the proposal, giving companies plenty of time to suggest beneficial changes. We predict a lot of attention being paid to this legislation over the coming months.
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