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US regulators to face lawsuit if landmark Wall Street rule isn’t eased

Published time: December 24, 2013 12:09
Former Chairman of the U.S. Federal Reserve Paul Volcker (Mario Tama/Getty Images/AFP)

Former Chairman of the U.S. Federal Reserve Paul Volcker (Mario Tama/Getty Images/AFP)

The American Bankers Association is threatening to file a lawsuit against US authorities to ease the landmark 'Volcker rule'. The banks claim rule restrictions on trust preferred securities (TruPS), may inflict billions of dollars in losses to 300 banks.

CEO of the American Bankers Association (ABA) Frank Keating made the claim in a letter to the heads of the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

I am writing to ask that you suspend the provisions in the final Volcker rule that treat debt interests in trust-preferred securities (TruPS) as ownership interests in a covered fund and that you promptly issue a communication to the banking entities you supervise alerting them that these provisions are not in force.

The obligation by the authorities under the new law to divest from TruPS, which combine the function of shares and debt tools, could cause multi-billion dollar losses to the lenders, according to estimates by the Financial Times.

The financial harm, while dispersed throughout the industry and impacting some banking entities more than others, is real, imminent, and irreparable,” commented Mr. Keating. “If the rule is not suspended, we will shortly file a lawsuit challenging the rule under the APA [Administrative procedure act] and seeking emergency relief

The Volcker rule, a measure to ban proprietary trading, aimed at reining in the risky behavior of the world’s largest banks, is one of the most contentious mandates and was approved in early December after 3 years of negotiations.

According to the rule banks will be required to report on risks such as portfolio hedging, which in theory will help avoid any repeats of the 'London Whale' case.

Comments (11)


Ally Hauptmann-Gurski 30.12.2013 02:48

Don't panic. They will probably get their way in this phase but is the majority of the world's capital still flowing to Wall Street?

No, every time an investment comes up for renewal, people will ask themselves if they could be hit like again like 2007/08. If all safeguards are removed again and conditions return to these 'golden' years - people will think twice and invest elsewhere. Everyone who was burnt then is not coming back, and neither are their cousins, neighbours, and associates.


Zeitgeisttt 27.12.2013 06:26

Noah Way 25.12.2013 14:12

Nationalize the banks, end the Federal Reserve, prosecute corporate bankers for fraud, theft, treason, racketeering, extortion, bribery and confiscate all thier holdings


Le t us all say this loud and clear....


Myeyezopened 25.12.2013 14:18

This is an admission that the banks can't make money without using criminal behavior. It's become systemic and normal practice. "Enforce the law and we'll die"! Boo Hoo.

Someda y, we're all going to pay for this. It's got to happen. What are you going to do folks? Ready yourself.

View all comments (11)
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