Volcker presses for banking rules; Some senators say plans could threaten ongoing reform efforts
Former Federal Reserve chairman Paul Volcker urged a Senate panel Tuesday to adopt new rules that would limit the investment activities of large banks as part of an overhaul of financial regulations, but lawmakers said the proposal could complicate ongoing negotiations on sweeping reform legislation.</br></br>Volcker told members of the Senate Banking Committee that he supports government safety nets, such as deposit insurance for commercial banks, but that taxpayers should not be on the hook for risky practices that aren't aimed directly at helping a firm's customers.</br></br>"There is not . . . a similar rationale for public funds -- taxpayer funds -- protecting and supporting essentially proprietary and speculative activities," Volcker said.</br></br>Backed by Volcker, President Obama proposed the new rules last month in an effort to restrict banks from making speculative investments using their own capital -- an activity known as proprietary trading -- and from owning a hedge fund or private equity fund.</br></br>Although receptive to the overall merits of the proposal, Banking Committee Chairman Christopher J. Dodd (D-Conn.) said that Congress had already spent months hashing out the details of regulatory reform and that the new proposals were "adding to the problems of trying to get a bill done." "There are tipping points. There's only so much that this institution will tolerate at a given point in time," Dodd said. "I don't want to be in a position where we end up doing nothing because we tried to do too much at a critical moment."