WASHINGTON Feb 27 A group pushing for tighter
regulation of Wall Street is suing top U.S. financial regulators
over delays in implementing a ban on proprietary trading by
banks, part of the Dodd-Frank financial reform law that was
supposed to take effect last summer.
Occupy the SEC, a subset of Occupy Wall Street that focuses
on financial regulators such as the Securities and Exchange
Commission, said it wants a federal court to order regulatory
agencies to put out final regulations to enforce the Volcker
rule, as the ban on speculation by banks is known.
Members of the group say they are at risk of losing money
they have deposited in U.S. banks if authorities do not
implement the law.
"Congress passed the Volcker rule in 2010 in order to
re-orient deposit-taking banks towards safe, traditional banking
activities...and away from the kind of speculation that has
imperiled deposited funds as well as the global economy at
large," the group said in its complaint.
"While some banks have pared down their proprietary trading
activities in anticipation of a fully implemented Volcker rule,
such activities nevertheless persist," the complaint said.
The Volcker rule, which was required by the 2010 Dodd-Frank
Wall Street reform law, would block banks from making
speculative trades with their own money.
Backers of the rule, including former Federal Reserve
Chairman Paul Volcker, for whom it was named, say such
proprietary trading exacerbated the 2007-2009 financial crisis.
The SEC, Commodity Futures Trading Commission, Federal
Deposit Insurance Corp, Office of the Comptroller of the
Currency and Federal Reserve were assigned to write the rule,
which was scheduled to take effect last July.
But the final version of the rule has been delayed amid
disagreements among the agencies and lobbying from the banks.
Regulators have said they hoped to complete the rule in the
early part of 2013, but there is no definite timetable for
completion. SEC Commissioner Daniel Gallagher said last week the
commission has "taken a back seat" to the bank agencies on the
Volcker rule for too long.
Fed Chairman Ben Bernanke testified before Congress on
Tuesday that the Fed has made a lot of progress on the Volcker
rule and that agencies are finding agreement on outstanding
Bank groups and Republicans want regulators to take their
time. They say the rule as written would cramp liquidity and
could hit parts of the banking business that are not as risky.
Occupy the SEC's complaint said two of its members have
checking accounts at JPMorgan Chase and Wells Fargo
and that their deposits are at risk until regulators
complete the proprietary trading ban.
The group cited last year's "London Whale" debacle, in which
JPMorgan lost about $6 billion on risky trades, as evidence that
banks are not curbing speculative activity enough.
"Plaintiffs seek to safeguard their deposits from bank
speculation and are consequently relying on the government to
implement the Volcker rule," the complaint said. "At this stage,
they have no choice but to wait until the defendants get around
to doing that."
The group named FDIC Chairman Martin Gruenberg, Comptroller
of the Currency Tom Curry, SEC Chairman Elisse Walter, CFTC
Chairman Gary Gensler and the Fed's Bernanke in its complaint,
filed in the U.S. District Court for the Eastern District of New
It also named Mary Miller, undersecretary of the Treasury
for domestic finance, and Neal Wolin, who is currently acting
secretary of the Treasury. The Treasury Department is not
directly involved in writing the Volcker rule but has a
Spokesmen for the SEC and FDIC declined to comment. The
CFTC, Fed, OCC and Treasury did not immediately respond to
requests for comment.