'Occupy The SEC' Scrutinizes The Volcker Rule For Loopholes
NEW YORK -- A handful of protesters at Occupy Wall Street are doing what the authors of a complex piece of financial legislation may have hoped no one would do. They are reading it.
The legislation is a draft of the so-called Volcker rule, a 298-page regulatory document that came out of last year's Dodd-Frank financial reform act. As originally proposed by Paul Volcker, then chairman of the President's Economic Recovery Advisory Board, the rule was aimed in part at preventing federally backed banks from making risky trades that could ultimately cost taxpayers. But in its current form, the Volcker rule is long, dense and -- critics fear -- full of language that affords banks a lot of wiggle room.
"It's a daunting document to look at," said Alexis Goldstein, a former financial sector employee who joined the Occupy protests a few weeks ago.
Yet Goldstein, 30, and a small party of fellow Occupiers are doing just that. The group, known as Occupy the SEC, has been reading through the Volcker rule line by line, flagging passages that seem to enable banks to skirt around regulatory intentions.
The Occupy Wall Street movement, now in its third month, has drawn fire from people who say its members are too vague in their criticism of the financial system. Occupy the SEC, which consists of between four and eight New York protesters, would seem immune to such charges. Its members are compiling a list of highly specific points, and their ultimate goal is to submit a letter to regulators detailing their concerns before the Jan. 13 deadline.
Anyone can send in comments on the draft of the Volcker rule -- and regulators will review those submissions before producing a final version of the measure -- but, as in most cases where draft rules are made available for public scrutiny, not everyone has the time or inclination to parse hundreds of pages of regulatory jargon. Goldstein noted that most of the comments on financial rules end up coming from the banks themselves, arguing for greater leniency.
Yet regulators "have to read and acknowledge" every letter that comes in, Goldstein said, and she hopes that Occupy the SEC can offer a bit of pushback.
"We just want to be a voice that's saying something different from what the banks are saying," Goldstein told HuffPost.
Occupy the SEC is just one of several dozen task forces within New York's greater Occupy movement, and Goldstein emphasized that she and the others going over the Volcker rule do not speak for or represent the wishes of Occupy Wall Street as a whole. But Occupy the SEC is in good company when it comes to casting a skeptical eye on the Volcker draft.
Paul Volcker himself has expressed displeasure with the current proposal, which is 30 times as long as the version originally included in Dodd-Frank. And this past Wednesday, a group of 17 House Democrats issued a letter to Federal Reserve Chairman Ben Bernanke asking that the latest incarnation of the Volcker rule be thrown out and replaced with something more streamlined, calling the current version "unnecessarily complex."
Other critics have charged that the Volcker rule gives banks too much responsibility for self-regulation and that its rules come bundled with exemptions in language so vague they undermine the whole effort.
"There are exceptions in there you could drive buses through," said Lawrence Baxter, a professor at Duke University School of Law.
That's what Occupy the SEC is on the lookout for.
Over the past month, the group has been breaking the Volcker text into chunks, reading them and discussing them at weekly "book club" meetings. When that's done, the members will put together their comment letter. And while they have no way of knowing whether it will have an effect, Goldstein said the process is worthwhile.
"We have no illusions about the fact that most of the comment letters are going to come from the banks, from the lawyers working at the banks," she said. "But I don't think that means we don't try."
Other people have undertaken similar efforts in the past. Last fall, during another open period for public feedback on the Volcker rule, regulators received some 8,000 comment letters, according to an analysis by Duke law professor Kimberly Krawiec. More than 7,000 of these were not from the world of finance, but from citizens wishing to register their distress with banks' misconduct in recent years.
Yet many of the letters from the public were relatively unsophisticated -- vague about the substance of the Volcker rule and full of ad hominem attacks -- whereas the letters from banking insiders were "meticulously drafted, argued, and researched," according to Krawiec's analysis.
"Your average person will find it very difficult to understand and comment on the issues here," Krawiec told HuffPost, noting that a thorough parsing of the Volcker rule "requires an understanding that quite frankly only industry insiders have."
Occupy the SEC may have an advantage there. Many of its members are well versed in the language of finance, and Goldstein said she has held technology positions at several Wall Street firms in the past eight years. She explained that, while she was initially dubious about Occupy Wall Street "being effective at all," she was moved to join after the mass arrest at Union Square on Sept. 24 and the confrontation that resulted in police officer Anthony Bologna pepper-spraying two demonstrators.
"Wall Street is a really complex place," said Goldstein, who now teaches programming at a software development training center in New York. "I have nothing against the people I used to work with."
But, she added, much of what happened in the years before and after the financial crisis was "really wrong and fraudulent, and we haven't really seen any repercussions."
"People feel like they got taken for a ride, and in some ways I think they really did," said Goldstein.
As for Occupy the SEC, it's unclear to what, if anything, the group will turn its attention after submitting comments on the Volcker rule, although Goldstein said she thinks the group has the potential for long life.
"There's a lot of other things going on. There's a lot of bills being introduced that are trying to kill parts of Dodd-Frank," she said. "We don't have a new rule in mind to jump right into on January 14, but there are plenty of them."