Just how controversial is the Volcker Rule? Outside groups have now sent at least 170,000 words of feedback to regulators, the Wall Street Journal notes, most of which are critical of the rule-in-progress. One of the biggest complaints is that the regulation — which is intended to curb speculative trading by banks for their own benefit, rather than their customers’ — is that it will hurt consumers by reducing liquidity in the market and strangle banks’ ability to hold large quantities of assets for investors to buy and sell.

Paul Volcker, former chairman of the U.S. Federal Reserve. (Bloomberg)

It’s still unclear, however, whether hedge funds and other non-investors will be willing or able to fill in the gap if trading contracts significantly. The Volcker Rule, moreover, also reduces the ability of banks to invest in both private equity and hedge funds by capping such investments at 3 percent, which could also reduce their own capital. More criticism of Volcker from the Securities Industry and Financial Market Association is here. You can read Paul Volcker’s full comment letter here and his most recent op-ed on it here.