The draft language indicated the new Volcker rule from the Obama administration would bar American banks from proprietary trading and place quantitative limits on activity of this kind for other financial institutions. The language contains the most stringent elements of the proposal introduced in January. The severity of the Volker rule seems surprising considering the dubious legislative and industry response to the proposals effectiveness. Lawmakers have been hesitant with the restrictions, doubting their capacity to prevent a financial crisis.
Among the rules being scrutinized, is one outlawing banks from making investments in hedge funds or private equity funds. Another stipulation in the language, the final draft of which is due late Wednesday, would bar financial institutions from purchasing companies if the product would posses 10 percent or more of the financial system’s total liabilities.
The draft describes the proposed rules as “ part of a comprehensive package of reforms to create a safer, more resilient financial system."
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