Chamber Faces Off with Dodd-Frank Backers Over Free Trade
Senator Levin has responded to a letter sent by the U.S. Chamber of Commerce to the U.S. trade representative asking federal officials to consider reviewing the proposed ban on proprietary trading under the “Volcker Rule.”
In a letter addressed to U.S. Trade Representative Ron Kirk, the U.S. Chamber has requested federal officials to consider whether the Volcker Rule “undermines U.S. trade policy and whether the [rule], as drafted, violates our World Trade Organization and free trade agreement commitments.”
Senator Carl Levin (D-Mich.) released the following statement this week in response to the U.S. Chamber of Commerce’s letter:
“It is not surprising that the U.S. Chamber, which opposed our efforts to prevent a repeat of the financial crisis that crippled our economy, is now trying to undermine those efforts. The Chamber’s letter places the interests of foreign governments ahead of protecting U.S. taxpayers and workers who had to bail out big banks’ bad bets just a few years ago. This last-ditch effort by the big banks and the Chamber to undermine the Merkley-Levin provisions of the Dodd-Frank Act ignores the fact that U.S. trade agreements allow us to regulate the safety and soundness of our financial institutions.”
President Obama proposed a ban on proprietary trading in 2010 and named it after former Federal Reserve Chairman Paul Volcker, its chief engineer. At the time, Volcker was the chairman of the Economic Recovery Advisory Board under Obama, a post Volcker resigned in January 2011.
The Volcker Rule – a rule restricting U.S. banks, or any institution that owns a bank, from trading on a proprietary basis (trading using the firm’s own funds as opposed to its customers’ money) – will be implemented as part of the Dodd-Frank Act. The rule has faced criticism from banks, claiming that the regulation would hurt their profits and impose additional costs on banks attempting to comply with the rule’s measures. In addition to prohibitions of proprietary trading, the rule also introduces restrictions on investment in hedge funds and private equity.
In a surprising move, foreign nations have also joined U.S. banks’ opposition to the Volcker Rule.
During the annual meeting of the World Economic Forum in Davos earlier this year, foreign finance ministers voiced their concerns to U.S. Treasury Secretary Tim Geithner. Many foreign nations, particularly members of the G20, declined the Obama administration’s invitation to join the U.S. in its efforts to limit banks’ size and risk-taking after the rule was announced in 2010.