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The Volcker Rule- Gary Gensler’s Goodbye Kiss

Four of the five regulatory agencies needed to enact the Volcker Rule are voting on the 10th December 2013. The SEC has said it will vote on or near the same date. The CFTC has scheduled a public meetingat 9.30 am EST to discuss proprietary trading and other business. In what is almost certain to be Gary Gensler’s valedictory meeting as chairman, it seems likely that the long-awaited Volcker Rule, banning bank’s own-account trading and effectively re-instating the Glass-Steagall act, will be approved by majority vote. The combined announcements carry the strong implication that inter-agency differences on the issue have finally been narrowed down in time for the year-end deadline set by President Obama.

The Volcker Rule , said to span some 950 pages, is a keystone in the Dodd-Frank legal architecture. Section 619 of the Dodd-Frank Act represents the major piece of unfinished business, awaiting enactment since the law was passed over three years ago. The Rule has been the most controversial element of Dodd-Frank. Inter-agency and industry-lobby contention has focused on the exact dividing line between disallowed proprietary trading and permitted hedging activity. Although widely-anticipated by the industry, the exact formulation of the Rule to be revealed on Tuesday will have fundamental implications for a long time to come, and will inevitably be subject to very well-funded legal challenge.

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