Bloomberg News

U.S. House Panel Said to Plan Hearing on Volcker Rule Proposal

October 12, 2011

Oct. 12 (Bloomberg) -- U.S. House lawmakers will examine a nearly 300-page proposal to ban banks from trading for their own accounts, adding another level of scrutiny to the rule proposed by four federal regulators this week.

Representative Spencer Bachus, the Alabama Republican who leads the House Financial Services Committee, is planning to hold a hearing on the proposal, according to a House Republican aide who requested anonymity to discuss the panel’s planning.

The so-called Volcker rule “may spark a mass exodus of clients from U.S. banks to banks abroad,” Bachus said in a letter to regulators last November. He sought to delay the rule during final negotiations over last year’s Dodd-Frank Act until there was international agreement on its provisions.

Lawmakers included the rule, named for former Federal Reserve Chairman Paul Volcker, in last year’s regulatory overhaul to keep banks from jeopardizing customer deposits with high-risk trading strategies. The measure covers banks with access to federal deposit insurance and comparatively cheap Fed loans as well as their holding companies and affiliates.

The Fed, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Securities and Exchange Commission approved the release of the proposal for comment. Regulators will take comment on the proposal until January 13.

Trade groups for the largest banks have complained that the regulators’ proposal lacks specificity and faulted what they say are inflexible exemptions for market-making. Consumer groups are seeking elimination of some of the exemptions for activities such as market-making, underwriting and risk hedging.

Moody’s Investors Service said the rule would be “credit negative” for bondholders of Bank of America Corp., Citigroup Inc, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley, “all of which have substantial market-making operations.”

Fox Business reported plans for the hearing earlier today.

--With assistance from Meera Louis in washington and Clea Benson in Washington. Editor: Gregory Mott

To contact the reporter on this story: Phil Mattingly in Washington at

To contact the editor responsible for this story: Lawrence Roberts at

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