Memo to Yellen: Don’t give in to the banks…
(Reuters) – Banks are lobbying U.S. policy makers for a delay of up to seven years from a provision requiring them to sell investments in private-equity and venture-capital funds, the Wall Street Journal reported, citing people familiar with the matter.
Bank officials, trade groups and lawmakers are quietly pressing the Federal Reserve for a multiyear delay of the rule that limits their investments in private-equity and venture-capital funds, the Journal said. (http://on.wsj.com/1l12Pi8)
The “Volcker rule,” part of the Dodd-Frank law, restricts banks’ ownership stake in hedge funds and private equity funds.
The rule prohibits banks from making speculative bets with their own money.
A delay of the rule would affect large banks such as Goldman Sachs Group Inc (>> Goldman Sachs Group Inc), JPMorgan Chase & Co (>> JPMorgan Chase & Co.) and Morgan Stanley (>> Morgan Stanley), the Journal said.
The private equity business has become less appealing in general to banks because of the 2010 Dodd-Frank financial reform law. The Volcker rule, expected to be implemented in a few years, prohibits banks from investing in any fund they do not manage.
JPMorgan Hid Trades Banned by Volcker Rule, Senate Probe Finds
JPMorgan Chase & Co. (JPM) engaged in high-risk proprietary trading under the guise of ordinary hedging, said Senate investigators, who urged U.S. regulators to strengthen the proposed ban on such trades known as the Volcker rule.
Regulators should require banks that hold federally insured deposits to explicitly link positions in derivatives to the underlying risk they are hedging, the Senate’s Permanent Subcommittee on Investigations recommended in a 300-page report released yesterday.
Could the Volcker Rule get erased before it’s fully written?
In a strongly worded letter to the five regulators tasked with writing the much-maligned rule that places limits on banks’ trading abilities, the House Financial Services Committee urged transparency during the rulemaking process — or the right for Congress to amend or repeal the outcome. (Read More:No Volker Rule Until 2013: Sources.)
In the letter — sent Thursday morning to regulators and obtained by CNBC — the committee’s ranking Republicans Reps. Spencer Bachus, R-Ala., and Jeb Hensarling, R-Texas, challenged the amount of time that has passed since regulators made public the most recent draft of the rule.
“The resulting confusion has only made it that much more likely that whatever final rule you issue will compound the regulatory uncertainty that continue to plague our economy,” Reps. Bachus and Hensarling wrote.
A U.S. Senate panel investigating the multi-billion trading loss by JPMorgan Chase that occurred several months ago will unveil its findings at a hearing to pressure regulators to shore up the controversial Volcker Rule.
The Permanent Subcommittee on Investigations, headed by Sen. Carl Levin (D-Mich.), interviewed JPMorgan officials and examiners at the Office of the Comptroller of the Currency, the agency responsible for oversight of JPMorgan, Bloomberg reports.
A Senate panel probing the multibillion-dollar trading loss by JPMorgan Chase & Co. plans to unveil its findings at a hearing this year to press regulators to tighten the Volcker rule, according to three people briefed on the matter.
Staff members of the Permanent Subcommittee on Investigations, headed by Senator Carl Levin, have interviewed JPMorgan officials as well as examiners and supervisors at the institution’s regulator, the Office of the Comptroller of the Currency, said the people, who spoke on condition of anonymity because the inquiry isn’t public.
One focus of the queries is whether JPMorgan’s wrong-way bets on derivatives would have been permitted under regulators’ initial draft of the Volcker ban on proprietary trading, the people said. The lender lost $5.8 billion on the trades in the first six months of the year.
Courthouse News Service.
WASHINGTON (CN) – The Board of Governors of the Federal Reserve confirmed that banks and financial companies it regulates will have until July 21, 2014 to conform to Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Commonly referred to as the Volcker Rule, after former Fed Chairman Paul Volcker, Section 619 prohibits banking entities from making speculative investments on their own behalf with federally insured deposits or from engaging in proprietary trading or from owning an interest in, or sponsoring, a hedge fund or private equity fund.
The rule is intended to limit the exposure of banks, and by extension, protections afforded to banks by federal agencies, to credit-default swaps and other types of high risk investments that helped to bring on the collapse of the financial services sector in 2007.
Separately, the rule also prohibits a banking entity that advises, manages or sponsors a hedge fund or private equity fund from entering into any transaction with the fund. This eliminates financial incentives for banking entities to place outside bets on positions held by funds they advise.