Levin Blasts Volcker Rule Proposal as Too Weak

By Wack, Kevin | American Banker, November 9, 2011 | Go to article overview

Levin Blasts Volcker Rule Proposal as Too Weak


Wack, Kevin, American Banker


Byline: Kevin Wack

WASHINGTON a Sen. Carl Levin, one of the legislative architects of the Volcker Rule, took sharp issue Wednesday with how regulators are proposing to implement the measure.

During a speech on Capitol Hill, Levin argued that federal regulators are implementing provisions regarding conflicts of interest at investment banks in a weak manner that is inconsistent with the law.

The Volcker Rule, enacted as part of the 2010 Dodd-Frank Act, includes language that addresses instances where banks market and sell a product to their clients while taking a contrary position in the marketplace. Levin explored that issue during a 2010 hearing with Goldman Sachs executives regarding mortgage-related securities they sold to clients.

Under the 298-page proposal, which was released last month by the Federal Reserve Board, the Federal Deposit Insurance Corp., and other financial regulators, certain transactions where banks have conflicts of interest with their customers could be prohibited, but only under specific circumstances.

Banks could evade the ban either by making what the proposal calls a timely and effective disclosure of the conflict of interest to their customers, or by erecting informational barriers within the bank in an effort to protect the customer's interests.

Levin, a Michigan Democrat, was harshly critical of those proposed exceptions.

"That's not nearly tough enough for me," Levin said.

In particular, he expressed skepticism about the idea that requiring disclosure is sufficient. …

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