The Trump administration is quietly helping Wall Street in its campaign to chip away at the toughest trading restriction imposed on banks after the financial crisis.
At a closed-door meeting in Washington on Monday, Treasury Secretary Steven Mnuchin directed five key agencies to re-examine what’s permitted under the Volcker Rule, said two people familiar with the matter. The provision, widely despised on Wall Street, bars banks from wagering on markets with their own capital. Mnuchin’s action could lead to changes that give banks more flexibility to trade without running afoul of the rule.
Volcker has been controversial since its inclusion in the 2010 Dodd-Frank Act. It was meant to prevent lenders with federally-backed deposit insurance from making big market bets that could lead to outsized losses. But critics say it has made banks too conservative, prompting a retrenchment from certain markets that has dried up liquidity.
Wall Street has frequently complained about how regulators defined banned trades under Volcker that purely benefit banks, as opposed to permitted transactions that firms do for clients. While banks are supposed to have leeway to help customers buy and sell securities, finance executives say the text of the 2013 rule was too vague, making it difficult to sort out what’s allowed.
Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein, whose firm has lobbied heavily on Volcker, underscored some of those concerns earlier this week, arguing that the rule has hamstrung banks from serving customers’ needs.
Mnuchin’s request, made at a meeting of the 15 agencies that make up the Financial Stability Oversight Council, indicate he’s not waiting for the results of the administration’s ongoing review of financial rules to start pursuing changes sought by the industry.
The two-hour gathering at the Treasury Department was the first FSOC meeting at which Mnuchin focused the agenda on President Donald Trump’s policy goals. The Treasury secretary established a working group on Volcker consisting of agencies that regulate banks and securities firms, said the people, who asked not to be named because the meeting wasn’t public.
In a brief public summary of the Monday meeting, the Treasury said FSOC discussed efforts to “assess the efficacy” of Volcker.
The agencies now reviewing the rule are the same ones that wrote it: the Federal Reserve, Securities and Exchange Commission, Federal Deposit Insurance Corp., Commodity Futures Trading Commission and the Office of the Comptroller of the Currency.
Treasury spokeswoman Molly Meiners declined to comment, as did spokesmen for the five agencies.