The fate of the Dodd-Frank Act’s ban on banks trading for their own accounts — one of the final pieces of the U.S. effort to prevent a repeat of the 2008 financial crisis — may rest with a cluster of economists at the Securities and Exchange Commission, Bloomberg News reported today. The agency’s 50 economists are attempting to calculate the costs and benefits of the Volcker rule, a linchpin of the Dodd-Frank Act that would curb the kind of high-stakes proprietary trading that could lead to crippling losses or bailouts at banks like JPMorgan Chase & Co. or Citigroup Inc. Court challenges that overturned other Dodd-Frank regulations because of faulty cost-benefit analysis have increased pressure on the SEC economists, led by Craig M. Lewis, a veteran finance professor on leave from Vanderbilt University. Their work may determine whether the rule could withstand a similar lawsuit — an option banks and trade groups say is under consideration.
