Occupy the Volcker Rule!
A year and a half ago, Alexis Goldstein was working as a business analyst for Deutsche Bank’s New York headquarters, helping traders on the global equity derivatives desk. Now she’s huddling every week with Occupy Wall Street in a glass-walled atrium next door to her old workplace, trying to rein in the kind of banks that once employed her.
“I felt I wasn’t doing anything to help the wider world. I don’t think it’s a contribution to be making wealthy people wealthier,” says Goldstein, who left Deutsche Bank in July 2010 and had previously worked at Morgan Stanley and Merrill Lynch. “With each passing year, I got more frustrated.” Goldstein is now using her industry expertise to help Occupy the SEC, a New York-based offshoot of Occupy Wall Street that’s working to curb the excesses of the financial industry through stronger regulation. The group’s work culminated most recently in a detailed, 325-page letter on the Volcker Rule, which it submitted to the Securities and Exchange Commission this week.
Goldstein isn’t the only Wall Street alum to find herself inside Zuccotti Park. George Bailey, another Occupy the SEC member, has spent 30 years in financial services, working in accounting, compliance, and risk-control, and he’s still in the industry. Caitlin Kline is a former credit-derivatives trader. Since October, they’ve all been part of the core Occupy group that’s waded through the mind-numbingly complex Volcker Rule—which itself is 300 pages long—to parse the new restrictions on so-called “proprietary trading,” prohibiting banks from speculative bets for their own benefit, rather than their clients.
Tackling the intricacies of Volcker would be daunting for anyone: the biggest industry firms and lobbying groups designated entire teams of lawyers and analysts to craft their own official comment letters on the monster regulation. But Akshat Tewary, a lawyer and Occupy the SEC member, insists that “it was a match made in heaven,” both because of thrust of the Volcker Rule and timeline for putting it into effect. Countering the industry line, the group’s letter on Volcker blames proprietary trading by big banks for being “a principal cause of the recent financial crisis.”
Tewary believes that “a lot of things activists at Occupy were concerned about could be addressed by Volcker” and says it was fortuitous that regulators began accepting public feedback just as the Occupy movement was gaining steam.
Despite the polemical tone of the movement, Occupy the SEC’s final letter is far from a anti-Wall Street screed. Though its unabashedly critical of the proposed regulation, which it calls too lax, it delves deeply into the substance and technical details of the proposed regulation, proposing that regulators eliminate loopholes and exceptions that have “woefully enfeebled” the effort to rein in speculative trading by government-insured banks.
Occupy the SEC, for example, criticizes a big exception made for repurchase agreements, a specialized securities transaction, arguing that it could banks simply shift trading around to continue self-serving, speculative trades. It warns, moreover, that prop trading could also move to less regulated markets like hedge funds as the ban only applies to big, government-backed banks—an argument that some banks have made as well. More generally speaking, it pushes regulators to create “simple bright-line rules” and calls for more defined fines and penalties for banks that are found to violate the regulation.
Occupy the SEC insists there’s no contradiction between its in-the-weeds policy advocacy and the attention-grabbing demonstrations that have dominated most of coverage of the movement. “You can work within the system, and you can work outside the system,” says Goldstein. “What unites us with the Occupy movement is a strong belief in direct action. Direct action can take many forms—you can have protests, but you can also look at the devil that’s in the details,” adds Eric Taylor, an anthropologist and part-time military officer who’s currently unemployed. “We’re engaging in participatory democracy through the means that already exists.”
That said, the group isn’t afraid of taking their work to the streets as well: to mark the submission of their letter, members also marched on the New York branches of the Fed and SEC.
The Occupiers hope their efforts also encourage other grassroots groups and individuals to wade into the wonky process of turning legal blueprints into final regulations. “People don’t normally participate in the rule-making process,” says Bailey. “It’s so technically daunting.” In fact, amid the heavy industry pushback, there have been other recent signs of grassroots advocacy on Volcker: thanks to a campaign by consumer-advocacy groups, the SEC received 14,479 form letters in support of a strong Volcker Rule as well.
The next step for Occupy the SEC? An action that’s even more direct than a comment letter: the group is aiming to present their findings in a face-to-face meeting with the regulators themselves. “Beyond that, there are plenty of other pieces of Dodd-Frank as well,” concludes Goldstein.