Senate’s "Volcker rule" amendment modified

By Kevin Drawbaugh

WASHINGTON (BestGrowthStock) – Democrats sought on Tuesday to finish crafting an amendment that would toughen language in the Senate’s Wall Street reform bill on the proposed “Volcker rule” curbing risky bank trading.

An aide to Senator Jeff Merkley, the amendment’s co-author, told Reuters that changes to the amendment would clarify its scope through steps such as excluding institutions that do not pursue traditional banking and protecting securitization.

“The amendment has been updated to reflect suggestions from other members (of the Senate) and to provide more clarity for regulators,” said Julie Edwards, spokeswoman for Merkley, who co-authored the amendment with Senator Carl Levin.

The Merkley-Levin amendment is meant to harden the bill’s provision barring banks from doing risky trading for their own accounts unrelated to customers, to get them out of the hedge fund business and to limit their future growth.

The bill’s original language embraced a proposal made in January by President Barack Obama and White House economic adviser Paul Volcker, the former Federal Reserve chairman. But the bill left the “Volcker rule” open to possible watering down after passage at the regulatory level.

Merkley-Levin would firm up the rule’s implementation while requiring large nonbank financial institutions to set aside more capital for speculative activity and prohibiting financial firms from betting against their customers.

The latest changes to the Merkley-Levin amendment would clarify it by making clear that banks may continue to sell, or securitize, loans they make, Edwards said.

In addition, she said, banks could divest in an orderly way any investments they would no longer be able to hold.

They could continue to manage clients’ money and make trades on their behalf as long as no bank capital was involved, within limits on banks bailing out investments that go bad and preventing conflicts of interest, she said.

Finally, institutions that do not make loans, take deposits or access the Federal Reserve’s discount window would be excluded from the rule, she said.

Merkley and Levin are both Democrats as is Senator Christopher Dodd, whose broader Wall Street reform bill was expected to win final Senate approval within days.

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(Reporting by Kevin Drawbaugh; Editing by Kenneth Barry)

Senate’s “Volcker rule” amendment modified