The Volker rule should push even harder to curb banks' bets with their own money than it would do as presently constructed, according to Michael Lewis, financial journalist and author of The Big Short, a best-selling book about the financial crisis.
"Firms should not be allowed to advise people to invest in securities at the same time they have positions in the securities, so I would actually go further than the Volker Rule," Lewis told CNBC on Thursday.
The Volcker rule, which aims to prevent a conflict of interest between firms and their clients, should completely separate the role of "market makers" from "advisors," Lewis said. He also argued during the CNBC interview for the reinstatement of the Glass-Steagall Act, which largely disallowed commercial banks from acting like investment banks. The law was nullified during the Clinton Administration.
The Volker rule, however, only outlaws certain kinds of trading activities by firms. Named after ex-Federal Reserve Chairman Paul Volker, the mandate is meant to curb propriety trading -- in other words, the bets firms make using money from their own accounts. But the rule has come under criticism for what some view as a numerous loopholes, like banks still being able to deal in corporate securities.
Lewis is not alone in criticizing the Volcker rule. Former Citigroup CEO John Reed also recently spoke in favor of instating a modern version of Glass-Steagall to prevent the conflict of interest between banks and their clients, which he argues worsened the fallout from the financial crisis.
Lobbying efforts of Wall Street firms have somewhat diluted the Volcker rule. They have argued that the rule will unnecessarily impede firms based in the United States, putting them at a global disadvantage. Some exceptions, subsequently included in the language of the legislation, may allow firms to bypass its provisions in certain ways and engage in the sort of activities the law was originally intended to restrict.