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Ex-Wall Street Banker: Volcker Rule Will Correct A Dangerous Mistake

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Former Federal Reserve chairman Paul Volcker in 2009. Volcker is the namesake of the so-called 'Volcker Rule,' a piece of financial regulatory legislation that has attracted strong criticism from Wall Street.
Former Federal Reserve chairman Paul Volcker in 2009. Volcker is the namesake of the so-called 'Volcker Rule,' a piece of financial regulatory legislation that has attracted strong criticism from Wall Street.

Apparently not every banker hates the Volcker rule.

Roger Vasey, who used to be in charge of global debt markets at Merrill Lynch, penned a pro-Volcker op-ed in The Wall Street Journal this week. In the piece, Vasey argues that the Volcker rule "is necessary to correct a mistake that poses a danger to our economy."

The mistake he's referring to is the partial repeal of the Glass-Steagall Act in 1999, which removed the firewall between investment banks and commercial banks, making it easier for the latter to make large-scale speculative trades -- a practice that some claim worsened the financial crisis.

The Volcker rule, which is part of the Dodd-Frank financial reform package, is meant to limit banks' ability to make risky trades with taxpayer-backed money, a practice known as propriety trading. The provision is not very popular on Wall Street, where bankers and their lobbyists have done everything they can to water down the legislation and paint it as a hindrance to economic growth.

But as Think Progress notes, Vasey isn't the only banking veteran who's voiced support for the Volcker rule. John Reed, the former CEO of Citigroup, said in February that if anything, the rule as currently written still grants too much leniency to banks -- a view shared by many analysts, and by a group of Occupy Wall Street protesters who have called upon regulators to enforce a strong version of the law.

It's also the view of Paul Volcker himself, the former Federal Reserve chairman for whom the rule was named. Volcker has dismissed concerns voiced by bankers that the rule will restrict trading in certain markets, make it difficult for U.S. banks to compete with institutions in other countries and cost too much to implement.

"My short answer to each of these objections is: 'not so,'" Volcker wrote in a letter to regulators in February.

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