The Volcker Rule: Great Expectations For Regulating Risk

On Tuesday, December 10, five federal regulatory agencies, the Federal Reserve, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller and the Commodity Futures Trading Commission, jointly released the long awaited and hotly contested "Final Rules Implementing the Volcker Rule."   The Rules and supplement, together more than 900 pages long, are already generating comment and controversy for their complexity and severity—or lack thereof, depending on who you ask.  The Rules become effective on April 1, 2014 with final conformance expected by July 21, 2015.

A Product of Hard Times

Paul Volcker, an economist, former Federal Reserve Chairman and former chairman of the Economic Recovery Advisory Board, initially proposed a (seemingly) simple rule restricting certain risk-taking activity by American banks in a 3-page letter to President Obama in 2009.  Speculative activity, for example, proprietary trading, was