If you know only the basics of arguments against the proposed Volcker Rule, it’d be easy to assume that it’s single handedly the worst piece of legislation ever written.
By the end of Monday, the deadline for an open comment period, U.S. regulators had received over 200 complaints and recommendations on how to fix – or do away with – the proposed rule, which will ban proprietary trading for deposit holding institutions and force these firms to divest any investments in private equity or hedge funds, among other things.
This is U.S. lobbying at its best. Though the major banks and investment dealers south of the border did submit their own recommendations – in J.P. Morgan’s case, a 58 page letter – Wall Street trade groups and lobbyists, such as the Center for Capital Markets Competitiveness at the Chamber of Commerce inundated regulators with their opinions, as pointed out by The New York Times.
However, this isn’t a U.S.-only effort. As we’ve reported numerous times, even Canada is getting in on the action because, as written, the Volcker Rule would severely affect Canadian bank-sponsored mutual funds (which the legislation currently classifies as being akin to private equity and hedge funds) and would limit purchases of Canadian government-issued debt (even though U.S. debt got an exemption.) While Canadian regulators have been leading the charge, the Canadian Bankers Association, which represents our banks, is in on the effort, so you can add them to the list of institutions that are upset.
Despite all this outrage – and a strongly worded defence from Volcker himself – so much of the debate remains theoretical. As DealBook points out, the best way to win an argument is to show, not tell. In order words, it’s best to give concrete examples rather than talk about what ifs and possibilities.
“Both supporters and critics have largely relied on arguments that – while sophisticated and technical – are merely theoretical. The letters tend to lack the sort of numerically supported real-world examples that could shed more light on the issue,” DealBook noted.
In defence of Canada, our arguments have actually been pretty clear cut, and they effectively pointed out that in the case of bank-sponsored mutual funds, for instance, U.S. banks got an exemption, so we should, too.
But the main point persists: winning this debate, whether you’re a supporter or a critic, will be hard.