Effingham Daily News, Effingham, IL

Local News

August 21, 2013

Obama urges renewed push for Wall Street overhaul

(Continued)

A key goal of the legislation was to prevent a rebuilding of a financial system that would permit banks to become so huge and intertwined that they would be “too big to fail.” But the nation’s top banks today are bigger than they were in 2008. A key proposal in the law would restrict banks from trading for their own profit, a practice known as proprietary trading. That rule, named after former Federal Reserve Chairman Paul Volcker, has yet to take effect and the current proposal has been weakened from what the law initially envisioned.

Annette Nazareth, a former Securities and Exchange commissioner who is now a partner at Davis Polk, said that when it comes to the Volcker rule, the law requires that various regulators write a single rule that applies to all the regulated financial entities. “So to some extent it’s not surprising that it has taken longer when they have had to reach consensus on some very tough issues,” she said.

Overall, she added, “we are in a better position than we were before the financial crisis.” She said banks have stronger capital positions, regulators are more aggressive and failing banks can be dismantled in ways they couldn’t before. “We have the building blocks for a better, more stable financial system.”

Action has varied from agency to agency. The Commodity Futures Trading Commission, for example, has been criticized for moving so swiftly on rules that it has had to issue an unusual number of so-called “no action” letters relieving firms that it oversees from the regulations.

Other central elements of the law have fallen into place.

The Senate last month confirmed Richard Cordray as the director of the Consumer Financial Protection Bureau created by the law. Republicans had been blocking his confirmation and demanding broad changes in how the bureau was configured and how it obtained its finances. But a number of Senate Republicans withdrew their opposition, putting Cordray in place and removing one element of uncertainty that had clouded the bureau’s work.

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