Simplify the Volcker Rule; Don’t Weaken It
Focus on outcomes instead of trying to get into traders’ heads.
What’s he thinking?
Photographer: Eric Piermont/AFP/Getty Images
The Trump administration is drawing up a proposal to simplify the Volcker Rule, one of the most controversial pieces of the 2010 Dodd-Frank financial reform. This could be a desirable development, as long as it doesn’t weaken a crucial safeguard against gambling with taxpayers’ money.
The Volcker Rule has a worthy goal: Limit government subsidies to financial institutions. When authorities bailed out banks during the 2008 crisis, they found themselves propping up activities — including outright bets on securities and derivatives — that had little to do with providing credit. To narrow the scope of what taxpayers support, the rule largely prohibits deposit-taking institutions from speculating.