Morning Must-Read: Phil Swagel: A Take at the Volcker Rule

Phil Swagel: A Modest Volcker Rule:

It is hard to know the full impact on markets until the Volcker Rule is fully in place in 2015, but my sense is that the regulations put out on Tuesday will allow banks to continue in their roles as facilitators of trading…. Regulators stated that they would collect and analyze data relating to firms’ trading activities, and make adjustments in response. This data-driven approach… is heartening for the regulators to put in writing…. Banks might wish that the Volcker Rule did not exist, but that discussion is long moot. It turns out that the rule as promulgated could add some useful risk-management processes by ensuring that firms understand their own hedging strategies while doing only modest harm to the economy through the impacts of reduced liquidity in financial markets. An irony is that Volcker Rule proponents see the final result as “tougher than expected,” pointing to symbolic measures such as requiring chief executives to attest that the required processes are in place. This might be an instance in which both banks and their critics are satisfied with a regulation—though perhaps only until the banks’ critics realize the situation…