The Volcker Rule Under Section 619 Of The Dodd-Frank Act

The Volcker Rule is a federal regulation that prohibits banks from conducting certain investment activities with their own accounts, and limits their ownership of and relationship with hedge funds and private equity funds, also called covered funds. The Volcker Rule’s purpose is to prevent banks from making certain types of speculative investments that contributed to the 2008 financial crisis (Volcker Rule Definition | Investopedia). It was proposed by the economist Paul Volcker. It came about in response to the crash of the financial markets in 2008. It is a part of the Dodd-Frank Act. It is under section 619 of the Dodd- Frank Act. It went into effect April 1, 2014 (Volcker Rule Definition | Investopedia).

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Volcker’s original rule was only three pages, but when the finally text came out it was 298 pages long. It had been watered down and tons of exemptions had been added to the rule though. It caused the rule to face allegations of being too complex and to costly to adopt. There is no one across the entire political spectrum that likes it including Mr. Volcker. Mr Volcker said, “I don’t like it, but there it is. I’d write a much simpler bill. I’d love to see a four-page bill that bans proprietary trading and makes the board and chief executive responsible for compliance. And I’d have strong regulators. If the banks didn’t comply with the spirit of the bill, they’d go after them” (Volcker Rule, Once Simple, Now Boggles). He does like the fact the proposed regulations make top management or the board of directors responsible for compliance. This rule has been compared to the Brown-Kauffman regulation that failed in the Senate. Former Senator Ted Kauffman believes that all the exemptions will be taken advantage of as loopholes (Volcker Rule, Once Simple, Now Boggles). This rule has been critically criticized by both the Democrats and the Republicans. This rule though could be the most important part of the reforms put into place since the financial crisis. The SEC

While, Goldman Sachs had a middleman that choose the mortgages to bet against, Citigroup did all of it themselves. They would create groups of mortgages that were going to fail, and they would then bet against them as a company while selling them to investors (Volcker Rule, Once Simple, Now Boggles). They would defraud the investors and reap the benefits from it. This sort of activity by the banks would be prohibited under the Volcker Rule. The only problem is though that such an activity could be called hedging and would be exploited as such an activity so that the banks could continue to do this. Henry Kaufman, financier, saw the Volcker Rule as a just rule, but he knew that it would be watered down. The big banks today control 70% of the assets (Volcker Rule, Once Simple, Now Boggles). Henry believes that the big financial conglomerates and separate investment banking need to be