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Former Fed boss tells banking critics opposition to trading curbs is not in their interest
ABU DHABI, United Arab Emirates (AP) ' Former Federal Reserve Chairman Paul Volcker on Wednesday urged critics of a proposed U.S. rule limiting speculative trading by banks to get behind the measure, saying that opposition to it is not in their interest.
His defense of the so-called Volcker Rule at a financial conference in the Emirati capital Abu Dhabi was the latest in an ongoing fight between Wall Street and Washington over tighter restrictions for banks operating in the United States.
The measure is designed to limit the ability of commercial banks backed by government deposit insurance to trade for their own profit. It was drawn up by regulators as part of a broad-based financial overhaul in 2010 and named after the former Fed chief.
Banks and others in the financial industry oppose the rule, which they say will hurt their ability to compete against overseas banks and will reduce trading volumes of stocks, bonds and other investments.
Volcker said he understands some banks would prefer not to have their trading restricted, and that they need clarity over any proposed government limits.
"But they shouldn't in my judgment be fighting the concept of the rule, just as they should not be fighting reasonably more prudent capital and liquidity standards," he said. "That is not in their interest, in my judgment. It's certainly not in the general interest."
Volcker used much of his speech at Abu Dhabi's lavish waterfront Emirates Palace Hotel to reiterate his defense of the pending rule, which is a response to the risky bets banks placed that contributed to the financial crisis.
The measure, which is due to be finalized this summer and come into force in 2014, continues to face opposition from U.S. lawmakers on both sides of the aisle.
Volcker echoed assertions he made earlier this month that the law is workable despite critics' fears.
"I don't want regulation to go any further than is absolutely necessary," he said Wednesday. "But I do want to take sensible steps to protect the basic banking industry ... and to force speculators outside of the basic commercial banking system."