WASHINGTON — The Volcker rule was designed to prevent another financial crisis similar to 2009, but some critics say it will only slow economic recovery.
The House Financial Services Committee examined the Volcker rule today in an effort to weigh its impact on job creators. It is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Republican members of the committee said the rule slows down job creation.
However, Rep. Maxine Waters, D-Calif., said a “properly enforced” Volcker rule protects American citizens from risky bank behavior.
Five witnesses representing the agencies that crafted the rule testified in its defense, including Mary Jo White, chairwoman of the Securities and Exchange Commission. Whitesaid the rule “takes a measured but robust approach” to regulate trade.
“Such collaboration should carry forward not just in implementing the rule, but also in coordinating the compliance and enforcement of the rule,” she said.
The rule prevents U.S. bank holding companies from engaging in “proprietary trading” and from sponsoring hedge funds and private equity funds, actions that greatly contributed to the financial crisis. Designers of the rule hope it will curtail speculative and risky behavior.
Mark P. Wetjan, acting chairman of the Commodity Futures Trading Commission, said it has made traders more responsible.
“Due to Dodd-Frank and the efforts of my colleagues and staff at the CFTC, today there is both pre-trade and post-trade transparency in the swaps market where it did not exist before,” Wetjan said.
The final rule will become effective on April 1, but allows for a 15-month non-compliance period.