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The Volcker Rule: A Brief Overview 

August 18, 2015

Maryam Shojaei-Baghini, The Market Mogul

Commonly referred, as the The Volcker Rule, is a section within the Dodd-Frank Wall Street Reform and the Consumer Protection Act that places trading restrictions on financial institutions, thus separating their investment banking, private equity and propriety trading (hedge fund) divisions from their consumer lending arms.

Origin

Paul Volcker, who was previously chairman of the Economic Advisory Board under President Obama, introduced this after arguing that such speculative activity by Banks played a key role in the previous credit crisis between 2007-2010 and with the potential aim of protecting taxpayers from bailing out banks. In 2010 President Obama showed subsequent support in hopes of a more stable financial system where a failure of a financial institution would not take the whole economy down with it and his intention of ending the mentality of “too big to fail”. A watered down bill that restricted, rather than allowing the initially suggested prohibition of propriety trading by banks, soon followed.

Read more: The Market Mogul

 
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