American Bankers Association President and CEO Frank Keating slammed the Volcker Rule in a Jan. 17 letter to House subcommittees, which met jointly on Wednesday to discuss the measure.
Keating, on behalf of the ABA, petitioned the subcommittees to submit the goals of the Volcker Rule to regulatory agencies before the hearing. The letter also asks Congress to re-draft the measure's set of rules to be available for public comment.
In the letter, Keating mentioned a number of issues surrounding the Volcker Rule, including its effect on the community bank model and consequences to U.S. competitiveness.
“The proposed rules may diminish the strength of U.S. banks in the global financial marketplace,” Keating wrote. “There is the additional concern that a number of the activities prohibited under the Volcker Rule would simply migrate to other sectors of the economy or even overseas, particularly to unregulated or lightly regulated financial entities where much of the recent financial turmoil found its origins.”
Keating also argued that proprietary trading was not the core cause of the 2008 financial collapse, citing a report by the U.S. Government Accountability Office.
The GAO report found that neither proprietary trading nor hedge/private equity funds were the cause of the recent economic downturn.
Keating said that the “proposed rules as written are unworkable and fail to carry out the intent of Congress to clearly define prohibited activity” in proprietary trading and risky investments.