Fed dragging its feet on the Volcker rule
January 20, 2012
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Governor Tarullo gave this statement in Congress on Thursday. He confirmed impressions from meetings with Fed, Treasury and FDIC in December, that the administration is really not interested in this proposal and therefore want a “soft” implementation. They will not draw a bright line that define “proprietary trading”, but rather initiate a data monitoring system to see what is going on before taking a strong stance. Read: Most current transaction will be allowed until further notice.He notes that regulating on trading intent is hard, but surely there are other ways to limit the extent of speculative trading?
In the meantime, the Government in the UK has supported all the proposals from the Independent Commission on Banking, including “ringfencing” of the big banks retail operations.It remains to be seen if they will have any more luck in delimiting “prohibited activities”.