Jeffrey Lacker of Richmond Fed says Volcker Rule implementation may not be possible

Jeffrey Lacker

Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond, recently said that regulators may never be able to implement the Volcker Rule.

Lacker told Trish Regan of Bloomberg Television that the Volcker Rule is “fairly difficult if not impossible to implement in a way that is at all reasonable.”

A provision of the 2010 Dodd-Frank Act, the Volcker Rule is a ban on proprietary trading—or the banks’ use of depositors’ money to make risky investments. Lacker said that banks’ trading practices were “kind of tangential” to the 2008 financial collapse and named the Volcker Rule as “high on the list” of changes he would make to the Dodd-Frank Act, according to Bloomberg.

Lacker added that the Volcker Rule is diverting regulators’ attention from the crucial provisions of the legislation, such as limiting taxpayer-funded bailouts through the use of living wills for banks, where banks must provide a plan for exiting the market in the event that the institution fails.

“We need to push hard to have firms structure themselves, restructure themselves if necessary, to make sure” their liquidation “is an orderly process,” Lacker said, according to Bloomberg. “Working through that will reveal a lot about what authorities should be afraid of or not afraid of about sending a large institution to bankruptcy without U.S. government assistance.”

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