The Dodd-Frank Act The Volcker Rule

1. The Dodd-Frank ActThe Volcker Rule Bradley Feige

2. Dodd-Frank Act • The Dodd-Frank Wall Street Reform and Consumer Protection Act, Represents the most comprehensive financial regulatory reform measures taken since the Great Depression • New Law requires: • Sixteen Titles • 243 New Rules • 67 Studies • 22 Periodic Reports

3. Volcker Rule (Title VI) • Prohibition on Proprietary Trading • A banking entity cannot engage in proprietary trading or • Acquire or retain any equity, partnership or other ownership interest in or sponsor a hedge fund or private equity fund

4. Impact on U.S. and Foreign Trade • Destroys banks ability to hedge against loss • Greatly effects foreign investment managers and funds • Hampers U.S. banks ability to buy and sell sovereign bonds on behalf of customers • Reduces liquidity in those markets • Impose a significant burden and higher costs on foreign banks

5. Policy Proposal • Close the loopholes and exemptions in order to not water down the Volcker Rule to the point in which it is ineffective. • A stable customer focused bank would enjoy a competitive advantage • Freed from the restraints of risk from proprietary trading activities • Banks that continue proprietary trading run a high risk of failing

6. References • Leonard, Street and Deinard: Dodd Frank • http://dodd-frank.com/?s=volcker+rule • KPMG: Dodd Frank for Foreign Financial Institutions • http://www.kpmg.com/GE/en/Insightmagazine/Documents/dodd-frank-for-foreign-financial-institutions.pdf • Council on Foreign Relations: Dodd-Frank Act • http://www.cfr.org/united-states/dodd-frank-act/p28735#p7 • Morrison & Foserster: The Dodd-Frank Act Cheat Sheet • http://www.mofo.com/files/Uploads/Images/SummaryDoddFrankAct.pdf • Wall Street Journal: EU Red-Flags ‘Volcker’ • http://online.wsj.com/news/articles/SB10001424052970204573704577185100193763384