President Barack Obama’s plan to bar banks from the alternative investments industry may be dead on arrival on Capitol Hill.
Sen. Christopher Dodd (D-Conn.), the chairman of the Senate Banking Committee, is likely to quietly drop or water-down the so-called Volcker rule, which would ban bank holding companies from proprietary trading and bar them from owning, sponsoring or investing in hedge funds and private equity funds. Several Republican senators, including the Banking Committee’s ranking member, have attacked the proposals, named for former Federal Reserve Chairman Paul Volcker, and warned that they would threaten the growing bipartisan accord on an overall financial regulation overhaul.
“Chris is retiring so he wants to end his career with an important regulatory reform bill and he wants to make the bill bipartisan,” a Dodd staffer told dealReporter. “He is not going to risk bipartisan support to make the White House happy.”
But a spokesman for the senator told The New York Times that Dodd still supports the Volcker rule and denied the dealReport report.
Still, the future of the Volcker rule is anything but certain. The recent loss of a Massachusetts Senate seat to the Republicans has deprived Democrats’ of their filibuster-proof majority; even had they retained the seat formerly held by Sen. Ted Kennedy, several Democrats on both sides of the Capitol have expressed reservations about the Volcker proposals.
And that is to say nothing of Republican opposition. Sen. Richard Shelby (R-Ala.), the top Republican on the banking committee, is on record opposing the restrictions. Another committee member, Sen. Bob Corker (R-Tenn.), told the Times that the proposal is “a soak-the-rich populist grab.”
Dodd’s committee is to meet with Volcker on Tuesday.