Democratic lawmakers yesterday criticized regulators for taking too long to finalize the Volcker Rule, a controversial provision passed in 2010 aimed at restricting banks from making risky investments with their own money, the Washington Post reported today. Democratic Sens. Carl Levin (Mich.) and Jeff Merkley (Ore.) said that the uncertainty surrounding the Volcker Rule jeopardizes the health of the economy. During the legislative debate on the Dodd-Frank Act in 2010, Merkley and Levin spearheaded the amendment banning banks from using their own capital to make trades, a practice known as proprietary trading. The provision called for stricter prohibitions than what was initially proposed by former Fed chairman Paul Volcker. But critics of the legislation argue that the rule unnecessarily limits some safe forms of trading and will severely affect profit at some of the nation’s largest banks. Ratings agency Standard & Poor’s issued a report this week the Volcker rule could reduce pre-tax earnings for the eight largest banks by up to $10 billion a year. Investment banks Morgan Stanley and Goldman Sachs stand to lose the most because a hefty percentage of their revenue is derived from trading.
