New Life for 'the Volcker Rule'

(Excepted from the Wall Street Journal article) The Senate is considering writing into law what Mr. Obama calls "the Volcker rule," which would effectively bar banks from the risky and often lucrative practice of trading for their own accounts. The Volcker rule is aimed at undoing a side-effect of the bailouts of 2008 and 2009: An assumption that government will always rescue big financial institutions, and thus make it easier for them to borrow heavily to make risky bets. The rule proposes that the government's safety net be extended only to banks that stick to taking deposits and making loans, not to those that engage in proprietary trading for their own profit. Banks would be forced to give up such trading or surrender banking licenses. If they choose to retain proprietary trading, they would be allowed to fail. Details are still in flux, but bankers are alarmed. J.P. Morgan Chase & Co. and Barclays PLC oppose the proposal. Posted in: Internal Fraud