Read the pdf of our statement here.

AFR Position Statement on FSOC Volcker Rule Study

The Volcker Rule limiting risky proprietary trading and leveraged fund speculation at taxpayer-supported banks is a significant priority for AFR and over 6,500 people submitted comments through AFR members.  The study issued Tuesday is a strong first step towards effective implementation of the law.  It recognized the complexity of the regulators’ tasks while resisting Wall Street’s urging to allow nuance to widen into loopholes.  It is now incumbent on the regulators to draft strong rules over the next nine months, and for Wall Street banks to commit to a new business model that focuses on customers, stability, and lending.

The regulators also addressed the size of our nation’s megabanks in two reports: the Study of the Effects of Size and Complexity of Financial Institutions on Capital Market Efficiency and Economic Growth (Sec. 123) and the Study & Recommendations Regarding Concentration Limits on Large Financial Companies. Unfortunately, both of these studies simply validate a dangerous status quo.  The largest banks have now grown even bigger than they were when they were first deemed ‘Too Big to Fail’ during the bailouts of 2008, and yet the reports do not discourage them from growing even bigger still, or adequately discuss the dangers presented by their massive size and interconnectedness.  In practice, the 10% risk-weighted non-deposit liabilities concentration limit in Dodd Frank will allow megabanks like JPMorgan Chase to purchase very large banks such as PNC or SunTrust without violating the rule, allowing still further concentration.  This inadequate standard is a part of the law, and FSOC’s report had to reflect that, but Treasury could have created an honest assessment of the risks of megabank size and complexity in its study.  Unfortunately, it did not.  The Secretary’s study relied on a narrow set of experts and generally failed to present the obvious and painful lessons of the financial crisis.