In a letter to the SEC and banking regulators, a bipartisan group of over 100 House Members, including oversight Chairs, urged that the comment period on the proposed regulations implementing the Dodd-Frank Volcker Rule be extended for at least 30 days past the current January 13,2012 deadline. The Members also asked the financial regulators to consider producing an interim proposed rule reflecting the comments from affected stakeholders and the CFTC, and to extend the implementation deadline.
Given the short timeline for comment and the rapidly approaching July 2012 implementation deadline, noted the House Members, concerns have been raised that affected stakeholders will not have a sufficient opportunity to examine the proposal, which is approximately 300 pages and includes a request for comment on more than 1,300 questions, and provide meaningful comment, and that regulators will not have adequate time to digest these comments.
According to the Members, the complexity of these issues necessitates a deliberative and thoughtful process that considers an appropriately tailored proposal to improve safety and soundness without disrupting market liquidity for investors and the flow of capital to businesses.
Ultimately, the significance of any final Volcker Rule for US businesses cannot be overstated given the direct impact on the U.S. capital markets, which today are the deepest and most liquid in the world. Initial reports from asset managers, mutual funds, pension plans and other stakeholders suggest that the draft would result in higher borrowing costs for US businesses, thereby impacting economic growth and job creation.
For example, noted the Members, given the nearly $8 trillion corporate bond market, if the cost of borrowing increases by just one-quarter of a percent for investment-grade bonds, and one-and-a-quarter percent for high-yield bonds, the impact on the economy will be greater than $45 billion for corporate bonds alone. This estimate does not consider the costs associated with consumer lending (e.g. student loans, auto loans), commodities, or other impacted markets. The effects are expected to be most pronounced for small and medium-sized companies.