The Good, the Bad, and the Volcker Rule?
| Autor | Rafael E. González Ramos |
| Cargo | J.D. Candidate University of Puerto Rico Law School, 2013 |
| Páginas | 124-134 |
T
HE
G
OOD
,
THE
B
AD
,
AND THE
V
OLCKER
R
ULE
?
1
R
AFAEL
E.
G
ONZÁLEZ
R
AMOS
*
I. Introduction ..................... ........................................... ........................................... ........ 124
II. The Dodd-Frank Act and the Volcker Rule ......................................................... 125
a. Prohibitions ............................... ............................................ ....................................... 126
b. Requirements, Regulations and Limits............................. ................................. 126
c. Permitted Activities .............................................................................. ..................... 128
III. The Expected Consequences and Some Comments ....................... ................. 130
IV. C onclusion ............................. ........................................... ........................................... ... 134
"I may not understand modern financial
attitudes, but I don't think a bank wants to be
conducting financial activities that w ill be
revealed as simply skirting the law."
– Paul A. Volcker
2
I. Introduction
Between 2007 and 2009 occurred what some call “the worst
economic episode of financial distress since 1930’s.”
3
It was the consequence
of a large number of banks, among th em the so called too big to fail, and
intermediaries who s hifted risks by exploiting loopholes in the capital
regulation framework to invest in highly leveraged investments. The main
targets of these investments were real state, commercial real estate and
consumer credit instruments. The guarantees offered by the government and
the fact that many financial institutions that where too big to fail also
contributed to the excessive risk taken by these entities.
4
As a result of these events, the Congress of the United States of
America enacted the Dodd–Frank Wall Street Reform and Consumer
Protection Act of 2009 (henceforth “Dodd-Frank Act”).
5
This law pretends to
regulate and control the activities that conform the financial system of the
*
J.D. Candidate University of Puer to Rico Law School, 2013; Certified Compensation
Professional (C.C.P).
1
Title adapted from T
HE
G
OOD
,
THE
B
AD AND THE
U
GLY
(U
NITED
A
RTISTS
, 1966).
2
Floyd Norris, Volcker Rule May Work, Even if Vague, N.Y.
T
IMES
, January 21, 2011, at B1.
3
Matthew Richardson, Roy C. Smith & Ingo Walter, Large Banks and the Volcker Rule, in
R
EGULATING
W
ALL
S
TREET
.
T
HE
D
ODD
-F
RANK
A
CT AND THE
N
EW
A
RCHITECTURE OF
G
LOBAL
F
INANCE
184 (Viral V. Acharya, Thomas F. Cooley, Matthew P. Richardson & Indigo Walter eds., John
Wiley & Sons, Inc., 2010).
4
Id.
5
Dodd–Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat .
1376-2223 (2010).
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