In reflecting on the
adoption of the Volcker Rule by the federal financial regulators, Senators Jeff
Merkley (D-OR) and Carl Levin (D-MI), co-authors of Section 619 of the
Dodd-Frank Act codification of the Volcker Rule said that enforcement and
public accountability will be critical going forward. While they are still
reviewing the details of the adopted Volcker Rule, the Senators noted
that early indications suggest that common sense has prevailed in the face of
even the fiercest special interest lobbying campaigns. In the final Volcker
Rule, hedging looks tougher, market-making looks simpler, trader compensation
remains appropriately structured, and CEOs are required to set the tone at the
top.
Section 619 was, among other things, intended to change the culture and practices at the largest financial firms, noted the Senators, and in the final Volcker Rule the financial regulators have taken a serious step forward in mandating critical corporate governance and tone at the top changes.
Further, the
Volcker Rule firewall, as embodied in the Merkley-Levin Amendment to
Dodd-Frank, remains intact to bars lending banks and their affiliates and
subsidiaries from engaging in the speculative, conflict-ridden activities of
making bets on the stock, bond, derivatives, and other markets and limits those
activities at systemically important nonbank financial institutions. The
firewall erected by the regulators acting pursuant to Section 619 allows for customer-oriented
services, such as underwriting and market-making to facilitate capital
formation for clients, risk-mitigating hedging activities to permit safe and sound operations, and fund management
services for customers.