Banks push U.S. Fed to delay Volcker rule : WSJ

Tue Aug 12, 2014 9:14pm EDT

A general view of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

A general view of the U.S. Federal Reserve building in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

(Reuters) - Banks are lobbying U.S. policy makers for a delay of up to seven years from a provision requiring them to sell investments in private-equity and venture-capital funds, the Wall Street Journal reported, citing people familiar with the matter.

Bank officials, trade groups and lawmakers are quietly pressing the Federal Reserve for a multiyear delay of the rule that limits their investments in private-equity and venture-capital funds, the Journal said. (on.wsj.com/1l12Pi8)

The "Volcker rule," part of the Dodd-Frank law, restricts banks' ownership stake in hedge funds and private equity funds.

The rule prohibits banks from making speculative bets with their own money.

A delay of the rule would affect large banks such as Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and Morgan Stanley (MS.N), the Journal said.

The private equity business has become less appealing in general to banks because of the 2010 Dodd-Frank financial reform law. The Volcker rule, expected to be implemented in a few years, prohibits banks from investing in any fund they do not manage.

Since the Volcker Rule was adopted, some banks have already made changes.

The Federal Reserve could not be reached for comment outside of business hours.

JPMorgan on Monday spun off its last remaining private equity business, One Equity Partners, and sold almost half of its stake in the portfolio. Morgan Stanley in 2011 spun off most of its ownership in the $4.5 billion hedge fund FrontPoint Partners.

Representatives from Morgan Stanley, JPMorgan and Goldman Sachs also could not be reached outside of their business hours.

(Reporting by Kanika Sikka in Bangalore; Editing by Lisa Shumaker)

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Comments (1)
nose2066 wrote:
The original Volcker rule was intended to keep banks from speculating with their customers’ deposit money.

After some Congressional hearings, an additional piece was added to keep banks from betting against their own customers. (The previous practice on Wall Street was to sell junk assets wrapped inside an appealing “package” that included a few good assets. After the packages of assets were sold to cutomers, the banks would bet that the value of the package would drop because of the junk assets inside.)

So do the changed rules still prevent the two original problems?

Aug 12, 2014 12:51am EDT  --  Report as abuse
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