It has been 2-1/2 years sine Obama signed the Volcker rule into law, as part of the broader Dodd-Frank financial reform package. The Volcker rule was intended to prevent banks from taking too many risks with their own money, including in areas like private equity and hedge fund investing. The idea was that banks primarily exist to serve clients rather than to enrich themselves via levels of proprietary and principal account investing that could theoretically head t another Lehman style collapse.
In July 2010 included was a two-year waiting period that would allow politicians and regulators to hammer out the final language.
They’ve tacitly penalized it by missing so many deadlines that we still don’t have any final Volcker Rule language—a full seven months after the laws was supposed to take effect. The Volcker Rule might not have any actual teeth until 2014.
The Volcker rule: safeguarding us from financial crises in 2024 and beyond.
Goldman has decided not to divest its interest in the fund, believing that it will be able to secure enough extensions to responsibly liquidate once Volcker is finalized. New funds since Dodd-Frank was signed including energy fund, a renminbi-denominated fund and a real estate mezzanine fund.
In other words, Goldman Sachs is profiting from activities that may be banned under Volcker because it didn’t begin moving when Obama’s pen struck paper.
So the Volcker Rule has become a cautionary tale but for all the wrong reasons. It was intended to help curb Wall Street recklessness—a culture in which banks invest first and ask questions later.
Source—fortune, dan primack