Dec 11 The U.S. Chamber of Commerce is asking
federal officials to consider whether a proposed proprietary
trading ban undermines U.S. trade policy, part of an ongoing
effort by industry groups to push back against the so-called
The controversial rule, which is required by the 2010
Dodd-Frank Wall Street reform law, would block banks from making
speculative trades with their own money. It was named for former
Federal Reserve Chairman Paul Volcker, who pushed for the ban.
In a letter dated Monday, the powerful business lobbying
group c alled for U.S. Trade Representative(USTR) Ron Kirk to
review the proposed Volcker rule, which has yet to be finalized
by federal banking and financial market regulators.
The chamber said the rule could violate free trade
obligations because foreign sovereign debt would be covered by
the new rule, while U.S. government bonds are exempt.
"The Volcker Rule's discriminatory provision certainly does,
at a minimum, send the wrong message internationally and gravely
complicates the long-standing U.S. goal of liberalizing trade in
financial services," the chamber said in the letter.
Business groups, Republicans in Congress and others have
been ramping up criticism of the rule in an attempt to influence
financial regulators as they hammer out its final details.
It is unclear whether the trade office would undertake the
chamber's requested review of a proposed rule. A USTR
spokeswoman said the office is reviewing the letter.
Even if the request is declined, critiques of the rule by
the chamber and others could form the basis of legal challenges
against the regulation once the final version is in place.
The chamber has developed a successful track record of
challenging financial regulations. Last year, the chamber and
the Business Roundtable won a lawsuit overturning a Securities
and Exchange Commission rule that made it easier for
shareholders to nominate directors to corporate boards.
Bank critics blame proprietary trading for exacerbating the
2007-2009 financial crisis. The Volcker rule is intended to curb
such risk-taking by banks with government backstops such as
Industry groups counter that the rule would cramp liquidity
and could hamper parts of the business that are not as risky.
Some foreign regulators have argued that the rules could
discourage banks from trading their sovereign debt, making it
harder for some nations to borrow.
The chamber said in its letter that the Volcker rule could
prompt foreign governments to retaliate and asked the trade
office to help financial regulators "understand the costs to the
American economy" of the rule.
A former U.S. Treasury official said he doubted USTR would
give the chamber any ammunition to use against the Volcker rule.
"USTR won't touch the Volcker rule with a barge pole," said
Gary Hufbauer, a senior fellow at the Peterson Institute for
International Economics. He said trade rules are vague enough
that the United States has "wiggle room" in this area.
The Federal Reserve, Federal Deposit Insurance Corp, Office
of the Comptroller of the Currency, Securities and Exchange
Commission and Commodity Futures Trading Commission have not
released a final draft of the rule and could still make changes
based on comments from foreign regulators and others.
Senator Carl Levin, a Michigan Democrat who co-wrote the
Volcker rule provision in Dodd-Frank, said on Tuesday that the
chamber's letter was part of an attempt to undermine efforts to
stabilize the financial system and prevent future crises.
"The chamber's letter places the interests of foreign
governments ahead of protecting U.S. taxpayers and workers who
had to bail out big banks' bad bets just a few years ago," Levin
said in a statement.
Business groups, including the chamber, are expected to air
arguments against the Volcker rule during a hearing on Thursday
in the Republican-controlled House of Representatives.