The Volcker rule, named for former Federal Reserve Chairman Paul Volcker, attempts to modernize the Glass-Steagall firewall between commercial and investment banks for the 21st century. As written by Merkley and Levin, it would stop banks that take customer deposits and borrow cheaply from the Federal Reserve from also running big-bet, high-risk trading operations. The goal is to push that activity out to hedge funds and other private investors, who would pose less of a threat to the financial system. Regular banks would engage in the lending activities critical to a strong economy, rather than gambling with their customers’ money.
Quote from New Republic article written by David Dayen and published 12/10/2013.
The Volcker Rule has been proposed, revised, and finally passed into law on January 14, 2014. The Volcker Rule is a response to the damage inflicted upon our economy by the revoking of the Glass-Steagall Act.
On July 26, 2010, John Cassidy of the New Yorker wrote an extensive article on the Volcker Rule. The article is a blow-by-blow account of Paul Volcker’s efforts to create the Volcker Rule. This is a lengthy article of 17 pages.
To paraphrase from James B. Stewart’s article of the New York Times entitled “Volcker Rule, Once Simple, Now Boggles“:
- Paul Volcker outlined his proposal in a three-page letter
- when the Volcker Rule became part of Dodd-Frank Act, the Volcker Rule took up 10 pages
- when Volcker Rule emerged for public comment, the text swelled to 298 pages accompanied by more than 1,300 questions and about 400 topics
CNBC has a short summary of the status of the Volcker Rule: Volcker Rule. This was written in the year 2012.
The Glass-Steagall Act was between 33 and 37 pages long! It kept our banking system “safe” for 60 years. Yes, times have changed. Technology plays a vital roll in our personal lives and our financial and economic systems. I’m with those who wish the U.S. Government would at least temporarily reinstate Glass-Steagall while we figure out a “better can opener” or perhaps a better “mouse trap” is more appropriate!