Dan Alpert's Two Cents

Another View: Looking Beyond the Volcker Rule

Notwithstanding all the riveting talk about political motivations, President Obama has finally decided to wrest control of financial reform efforts from his somewhat tone-deaf minions and the “too-hard-to-tackle” crowd in Congress. Better late than never. But in belatedly joining forces with Paul Volcker, the man who will ultimately go down in history as the wisest regulator of his generation (sorry, Maestro Greenspan), Mr. Obama has waded into an immeasurably complicated debate that is enormously difficult for the general public to comprehend.

Regulation of the financial sector of economies is a subject that easily offers as many opinions as there are people who study, write on, and implement regulation. Mr. Volcker’s Group of Thirty report, compiled a year ago during the depths of the financial crisis, is a work we fundamentally agree with in most respects. But it is written in policymakers’ prose, the full meaning of which eludes many legislators—to say nothing of the public and some in the financial press. In his testimony Tuesday, Mr. Volcker did a yeoman’s job of laying things out for the Senate Banking Committee, and he dispensed with the notion that his proposals would be too difficult to implement or would yield consequences he neither intends or hasn’t already considered and accommodated. But the very fact that we so enjoyed the give-and-take between Chairman Volcker and the committee members, being way too wonkish ourselves, gives us pause with regard to the appreciation of this critical issue by a broader constituency.

We are also motivated by our alarm at Senator Dodd’s ‘don’t let the door hit you on the way out’ farewell to Mr. Volcker at the conclusion of Tuesday’s hearing, in which the Senator noted that the wise man’s suggestions might threaten the political likelihood of getting any financial industry reform bill through Congress.

So, today—at the risk of further upsetting the Senate Banking Committee’s delicate political apple cart—we endeavor to offer our views on prudential regulation[2] in a simple manner that has some chance of being explicable to the average businessperson, and to even a nonfinancially oriented member of Congress about whose vote Mr. Dodd is so concerned.

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The preceding article was originally published at The New York Times and reproduced here with the author’s permission.
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