Opening Statement: Hearing on the Volcker Rule
Thank you, Mr. Chairman. While many observers still disagree about the central cause of the financial crisis, we know that among many other factors, proprietary trading did play a role in the 2008 economic collapse. Proprietary trading has indeed produced tremendous profits for some of our largest financial firms, but it also contributed to losses during the height of the financial crisis.
And ultimately, this is why Congress acted and directed our regulators to institute a ban on proprietary trading for those firms that have access to the taxpayer-backed federal safety net.
However, even with the clear prohibitions under the Volcker Rule, Congress recognized that commercial banks should still be able to serve clients through underwriting and "market-making" – or acting as an intermediary between buyers and sellers in the securities market, and gave regulators significant flexibility to implement this provision. There are likewise exemptions for "underwriting" and "risk-mitigating hedges."
Yet the ongoing uncertainty surrounding the implementation of the Volcker Rule continues to leave our economy, as well as the safety and soundness of our financial institutions, at great risk.
Even Standard & Poor's has agreed that proprietary-trading restrictions could help make banks safer stating: "the implementation of the Volcker rule could have favorable implications for the credit profiles of some of the largest U.S. banks, such as reducing trading portfolio risk." S&P continued: "This risk mitigation could lessen revenue and earnings volatility, which we view favorably."
Therefore Mr. Chairman, I look forward to our witness' testimony and their insight on how regulators may structure a strong Volcker rule that is simple, clear, and provides certainty so that banks and investors will know how it will be implemented and enforced across the regulatory agencies.
I yield back the balance of my time.