Legislation giving the Federal Reserve sole rulemaking authority for the “Volcker rule” creates efficiency – but it doesn’t eradicate the rule, the chairman of the House committee that reported out the bill said last week.
House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said in floor remarks published Friday in the Congressional Record that the bill (H.R. 4790, the “Volcker Rule Regulatory Harmonization Act,” sponsored by Rep. French Hill, R-Ark.) would provide “increased regulatory clarity for entities that must comply with the Volcker Rule.”
The rule, named after former Federal Reserve Board Chairman Paul Volcker, is intended to prohibit banking firms from engaging in proprietary trading or entering into certain relationships with hedge funds and private-equity funds.
Hensarling said in his remarks that the legislation’s approach in consolidating rulemaking authority and interpretation with the Fed eliminates confusion.
“The challenge here is, Mr. Speaker, is that some entities can have as many as five different regulators interpreting the Volcker Rule, and five different regulators enforcing the Volcker Rule,” Hensarling said. “Sometimes they conflict with each other, Mr. Speaker, and frankly the entity doesn’t know what to do. You cannot have an economy based on the rule of law when, frankly, you don’t know what the law says.”
However, Hensarling said that the bill (which passed the House April 11 on a vote of 300-104) does not repeal the rule. “I wish it did, but it doesn’t,” he said.
“And, outside of providing important relief to community banks – bipartisan regulatory relief that, by the way, has already been approved by a strong two-thirds of our Senate colleagues – this bill doesn’t require any changes to the Volcker Rule itself,” Hensarling said.
“I highlight this because this legislation, again, represents something that Members of Congress should agree on: that regardless of how you stand on a particular rule or regulation, it at least ought to be clear, and there ought to be one interpretation and one enforcer of the rule so you know what the rule is. You can’t abide by the rule if you don’t know what the rule is. This is only commonsense, and it can only lead to, again, stronger, deeper, more liquid capital markets to help our job creators.”
Hensarling Delivers Remarks on Bill to Improve Capital Markets