Senate may dilute proposals outlined in Volcker rule

1 March 2010

Proposals to overhaul the banking industry outlined by US President Barack Obama may be diluted to receive approval from the senate, reports have claimed.

As part of wide-ranging reforms for the financial services industry, the US government proposed to limit the size of banks and prevent those institutions involved in proprietary trading from investing in hedge funds or private equity groups.

The legislation, known as the Volcker Rule after Federal Reserve chairman Paul Volcker, has yet to be met with approval from either party in the house.

Chris Dodd, chairman of the Senate’s banking committee, is leading a discussion between congress members on amending the proposals to only ban such investments when they pose a threat to the wider US economy.

However, David Axelrod, White House senior adviser, told the Wall Street Journal that the government is still hoping to introduce the legislation in its original form.

“As an administration, we're as committed to the rule as the day the president announced it. It was presented as a solution to address a problem that the president perceived."

“There's no diminution of concern about the problem of proprietary trading by banks,” he concluded.

By Jim Ottewill

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