The Volcker Rule: Has Anything Changed?
Abstract: The paper gives an overview of proprietary trading by banking entities leading up to the 2008 financial crisis. Section II describes the Volcker Rule as proposed and implemented. Section III analyzes the broad exceptions to the Volcker Rule. Section IV gives an evaluation of the impact and effectiveness of the Volcker Rule.
I. Introduction
Out of the ashes of a devastated financial system following the 2008 crisis, reform legislation emerged in the form of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act was signed into law on July 21, 2010.[1] To analyze the entirety of the 848 page instrument is not feasible within these online pages, so I limit discussion to what is commonly known as the Volcker Rule. The Volcker Rule was advanced by the Group of Thirty, chaired by the legislation’s namesake, Paul Volcker.[2] The Group of Thirty, an international group of financial experts who blamed proprietary trading and conflicts of interest in the financial system for the 2008 financial crisis, advocated for implementation of the Volcker Rule to eliminate such behavior by banking entities.[3]
The elimination of proprietary trading by banking entities is a relatively simple idea, but in application the issue becomes murky. This lack of clarity is…
[1] Press Release, Office of the Press Secretary, Background on the President’s Bill Signing Ceremony Today (July 21, 2010) available at http://www.whitehouse.gov/the-press-office/background-presidents-billsigningceremony-today.
[2] Alison K. Gary, Creating a Future Economic Crisis: Political Failure and the Loopholes of the Volcker Rule, 90 Or. L. Rev. 1339, 1341 (2012).
