Big banks are winning on Volcker

When the big banks began lobbying against the Volcker Rule, they faced a problem: A lot of people hated them. Which meant that so long as the Volcker Rule seemed like a way to punish them, it was probably safe. Their protests, if anything, made it more politically appealing.
(PASCAL LAUENER - REUTERS)

The solution for the banks was to let other institutions, like insurers and pension funds, lead the fight. Bloomberg has many telling details about their big campaign, explaining how they’ve “commissioned studies, tested messages with focus groups, distributed talking points and set up a phone hotline for Capitol Hill staffers.” Now there’s growing momentum for the regulation to be reconsidered and reproposed--which is exactly what many big banks have been hoping for.

Credit Suisse invited Democratic congressmen to its New York office for a presentation on the Volcker rule....Representatives Joe Crowley of New York, Jim Himes of Connecticut and John Carney of Delaware -- along with Auwaerter and officials from firms including Prudential Financial Inc. (PRU), MetLife Inc. (MET) and Western Asset Management Co...

The proposed rule, they said, would slow bond trading, making it harder for them to execute their strategies. They predicted that would mean lower returns for funds like DiNapoli’s, as well as for 401(k) plans and individual investors.

Less than two weeks after the Credit Suisse visit, 26 New Democrats signed a letter to regulators noting that “millions of public school teachers, police officers and private employees depend on liquid markets and low transaction costs” to retire with “dignity and ease.”

To be sure, some like Rep. Barney Frank who support a strong Volcker Rule also argue that the rule is untenable in its current form, which also adds to the case for overhauling it rule and delaying its implementation.