Discover GOP Opprobrium

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The Volcker Rule (also known as the "Volcker Plan") is a proposal by American economist and former Federal Reserve Chairman Paul Volcker to restrict banks from making certain kinds of speculative investments if they are not on behalf of their customers.[1] Volcker has argued that such speculative activity played a key role in the financial crisis of 2007–2010. Volcker was earlier appointed by Obama as the chair of US President Barack Obama's Economic Recovery Advisory Board, a board created on February 6, 2009.

The Volcker Rule was first publicly endorsed by President Obama on January 21, 2010.[2][3] The proposal specifically prohibits a bank or institution that owns a bank from engaging in proprietary trading that isn't at the behest of its clients, and from owning or investing in a hedge fund or private equity fund, as well as limiting the liabilities that the largest banks could hold.[4]

On January 21, 2010, under the same initiative, President Obama announced his intention to end the mentality of "Too Big to Fail."[4]

In a February 22, 2010 letter to The Wall Street Journal, five former Secretaries of the Treasury endorsed The Volcker Rule proposals.[5] The Volcker Rule remains unimplemented. As of February 23, 2010, the US congress began to consider a weaker bill allowing federal regulators to restrict proprietary trading and hedge fund ownership by banks, but not prohibiting these activities altogether.[2]

Senators Jeff Merkley, Democrat of Oregon, and Carl Levin, Democrat of Michigan, introduced the main piece of the Volcker Rule - its limitations on proprietary trading - as an amendment to the financial reform legislation that was passed by the U.S. Senate on May 20, 2010. Despite having wide support in the Senate, the amendment was never given a vote. When the Merkley-Levin Amendment was first brought to the floor, Senator Richard Shelby, Republican of Alabama, objected to a motion to vote on the amendment.[6] Merkley and Levin responded by attaching the amendment to another amendment to the bill put forth by Senator Sam Brownback, Republican of Kansas. Shortly before it was due to be voted upon, Brownback withdrew his own amendment, thus killing the Merkley-Levin amendment and the Volcker Rule as part of the Senate bill.[7] It is reported that a mandatory version of the Volcker Rule may end up being part of final legislation negotiated by a congressional conference committee, which is merging House and Senate versions of financial reform legislation.[8]