Democrats in the House want financial regulators to continue working on the Volcker Rule to make it less complicated with fewer loopholes.
Reps. Maurice Hinchey (D-N.Y.) and Peter Welch (D-Vt.) are leading 15 other Democratic representatives in a call to the Federal Reserve to go back to the drawing board with the rule that was a major provision of the Dodd-Frank Act, according to TheHill.com.
"We believe the draft rule falls far short of the reform needed to protect our country from the kind of risk-filled financial activities that caused havoc on our economy," the lawmakers wrote in a letter to the Fed, TheHill.com reports.
The Fed and other regulators released the current version of the rule, which is aimed at cracking down on propriety trading, in Oct. Its language also limits a banks’ relationships with riskier hedge funds or private equity funds.
"Unfortunately, the Federal Reserve's draft Volcker Rule is unnecessarily complex and includes several large loopholes that undermine Congress's intent to protect banking deposits from risky trading activities," the letter says, according to TheHill.com. "For example, under the draft rule, commercial banks would be allowed to engage in market making and hedging activities that can provide easy cover for risky proprietary trading. The draft rule also relies too heavily on banks to self regulate and self report."
The financial industry is urging regulators to keep the rule flexible and warning that strict rules could hurt financial markets.