Despite being amended by the Federal Reserve and other regulatory agencies in order to reduce any adverse impact on buy-side financial institutions like banks and hedge funds, the Volcker Rule will be more deleterious to the economy than helpful, according to several lawmakers who have made their opinions known about the utility of the legislation.
The Volcker Rule, which prevents financial organizations from making certain types of trading transactions, was implemented as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act as a hedge against the possibility of the country falling into another economic tailspin. While advantageous in theory, representatives on Capitol Hill recently indicated that it’s too far-reaching.
“The latest exhibit: the 932-page complex, confounding, confusing and convoluted Volcker Rule,” said Texas Rep. Jeb Hensarling, chairman of the House Financial Services Committee, according to Medill News Service. “The Volcker Rule, I believe, remains a solution in search of a problem.”
Belief in the rule’s ability to be beneficial to businesses’ effective data governance appears to be largely guided by party affiliation, with Democrats in favor of it, while Republicans, for the most part, opposed. California Rep. Maxine Waters, a Democrat, recently noted that when “properly enforced,” it would be mutually beneficial to businesses and consumers. However, Republican Rep. Shelley Capito of West Virginia noted that it has the potential to result in more red tape for buy-side financial institutions, thereby reducing efficiency.
“I’m sitting here listening and I must have heard at least 40 times, ‘inter-agency group,'” said Capito, according to the news source, during a recent hearing. “Who’s in charge? I have yet to hear, really, who’s in charge.”
Dozens Dodd-Frank regulations still not in effect
Though the Volcker is written law, it won’t be fully implemented until April, making it the latest regulation under the Dodd-Frank Act that’s either been postponed or rewritten. Only half of the rules formed by the legislation, which was officially signed into law three years ago, are currently in effect, according to a poll reported by CNBC.
When the rule – named after Paul Volcker, former head of the Federal Reserve – is fully enforced, some of the biggest adjustments banks and other financial institutions will have to deal with are more rigorous reporting requirements, business news magazine Forbes recently noted. Some of the specific requirements include banks consistently making note of “meaningful quantitative data” meant to assist regulators in identifying potential security risks of information profiles.