A leading champion of tighter rules on Wall Street says there’s a real danger one of the pillars of financial reform will remain weakened unless a key regulator steps up and forces it upon the banks it regulates — something for which that regulator has shown little enthusiasm, and that those banks desperately want to avoid.
In a Monday interview with TPM editors and reporters, Sen. Jeff Merkley (D-OR), an author of the Volcker Rule, identified the Office of the Comptroller of the Currency — the agency charged with regulating big banks — as a key obstacle to preventing those very banks from making risky bets with depositor funds.
“It all depends upon the OCC,” said an exercised Merkley. “I talked to several of the regulators, had private conversations with them … who are very supportive of a much stronger Volcker Rule, but it comes down to … the five regulators … have to agree, and the OCC oversees the banks that actually have the problem and need the firewall.”
At a Banking Committee hearing last week, Merkley pressed OCC head Thomas Curry to weigh in on the propriety of certain risks banks might be allowed to take on as the result of loopholes in the draft version of the Volcker Rule. Curry avoided making specific pronouncements but did allow that regulators were taking a close look at the Volcker Rule. “I would add that I think our experience here, as it unfolds with JPMorgan Chase, would help inform our views in the final rule making,” Curry said.
Reached for comment, an OCC spokesman referred TPM to the same exchange before the Banking Committee.
JPMorgan’s recently divulged losses on risky trades they made with depositor money has created a new sense of urgency about the need to tighten the Volcker Rule, which is tentatively set to be implemented next month. Merkley suggested that he doubts the OCC shares that urgency.
“If he can’t come to a point where …” Merkley said, before dialing back, “I think that the key is the OCC, and the OCC deciding that this firewall is important for them to enforce.”
JPMorgan CEO Jamie Dimon will testify before the committee on Wednesday, but Merkley doesn’t expect his testimony to alter the balance of forces that will ultimately decide whether a weak or strong Volcker Rule takes effect.
“I think that if Dimon came in and surprised everyone … if he came in and said there are systemic issues that have been raised here, that I think do need to be addressed, it would change the conversation to have a champion among one of the major banks,” Merkley said. “I would be very surprised if we saw that testimony.”
Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight, and the debt limit fight. He can be reached at firstname.lastname@example.org.