It looks like the House and Senate struck a final deal on the financial overhaul sometime after 5am this morning. Blanche Lincoln’s derivatives language remained almost intact, and the car dealers beat the Pentagon and will not be subject to the new Consumer Financial Protection Bureau’s scrutiny. The Volcker Rule survived, albeit with a limited 3% carveout.
The rule, named for Paul A. Volcker, the former Federal Reserve chairman who proposed the measure this year, restricts the ability of banks whose deposits are federally insured from trading for their own benefit. That measure had been fiercely opposed by banks and large Wall Street firms, who viewed it as a major incursion on some of their most profitable activities…
Banks managed to wrangle limited exceptions to the rule that would allow them to continue some investing and trading activity. The agreement limits banks’ investments in hedge funds or private equity funds to no more than 3 percent of a fund’s capital; those investments could also total no more than 3 percent of a bank’s tangible equity.
Overall, the bill is stronger than most, including Wall Street, expected. And I think it will pass. Pretty impressive stuff.
