Inside the Financial-Reform Deal

A year and a half after the financial crisis, financial-reform is nigh after both houses of Congress agreed on legislation. Business Insider provides a rundown of what’s in the bill. The Volcker Rule stipulates that banks can only invest 3 percent of their tangible common equity in hedge funds or private equity, and they’ll be banned from proprietary trading. Banks are also reportedly very concerned about language in the bill that could prevent them from hedging their exposure to investments they make for clients—a response to the Goldman Sachs ABACUS scandal. Banks will still be allowed to trade derivatives, so long as they are housed in separately capitalized subsidiaries. Also, a consumer-protection agency will be housed in the Fed. So are the banks happy? “This is a tough law that will also have profound effects on the operations and cost structure of most financial service companies and financial markets,” one CEO tells DealBook. However, an analyst says, “I don’t see there being a tremendous clampdown on the ability of banks to make money,” and predicts “numerous methods of getting around the most onerous provisions.”