Paul Volcker, President Obama's special advisor on financial regulatory reform, appears to have endorsed the main bill sponsored by Sen. Chris Dodd of Connecticut. Although details are still being worked out, Congress is moving to pass the bill by the end of the month.
“I think the Dodd Bill has some essential elements and some of them haven’t been fully resolved including I guess the so-called Volcker Rule that’s under consideration today. I don’t know where it stands at the moment. I think it does include the really essential elements that we need. The central issue behind all this is ‘too big to fail’ and moral hazard.”
“It certainly has a mechanism that the expectation of ‘too big to fail’–I can’t say go away – but it has a mechanism to deal with that big question. I think it can deal with it effectively, yes.”
On backlash against separating prop-trading:
“Few of our banks have any real significant activity in proprietary trading. There are a very tiny group of banks that are worried about it. The problem goes back to ‘too big to fail.’ There is an elaborate arrangement for decades for protecting banks. I want to make a separation between the activities that are protected and shouldn’t be protected. That’s the heart of the matter.”