House panel seeks public input on reworking key piece of Dodd-Frank

By Peter Schroeder - 08/07/12 02:25 PM ET

House Financial Services Chairman Spencer Bachus (R-Ala.) is taking suggestions as House Republicans prepare to rework a key piece of the Dodd-Frank financial reform law.

The congressional panel announced Tuesday that it was soliciting public input on how lawmakers should rewrite the "Volcker Rule," one of the most contentious pieces of the financial overhaul aimed at trimming risky trading by banks.

Warning that the existing requirement could have a "devastating" impact on the economy, Bachus said lawmakers are exploring "legislative alternatives" to the trading restriction.

"If regulators implement the Volcker Rule in its current form, the repercussions will be devastating to our economy. It will undermine our nation’s ability to compete and make it harder for Main Street businesses to raise capital so they can grow and create jobs," he said in a statement.

Bachus offered no hints for how the Volcker Rule might be reworked, but is opening the floor for suggestions until Sept. 7, after which a hearing on a legislative overhaul will be scheduled. He added that is he looking for input from "investors, industry professionals and the public."

The committee went so far as to establish a House email address specifically to gather in Volcker Rule alternatives — This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

While Republicans have been broadly critical of Dodd-Frank, the Volcker Rule has proven to be particularly contentious with critics both on Capitol Hill and on Wall Street. The requirement, named after its main backer, former Federal Reserve Chairman Paul Volcker, is aimed at preventing banks with federally guaranteed deposits from engaging in "proprietary trading" — trading done specifically in search of bank profits, and not at client direction. It also limits the relationships banks can have with riskier traders like hedge funds and private-equity funds.

Implementing the rule has proven to be a weighty task for financial regulators, indicated by a proposed rule unveiled in October that ran hundreds of pages and asked for input on more than 1,000 questions. Industry groups critical of a restrictive rule and Wall Street critics hoping for a strict firewall were among the thousands of comments regulators received on that proposal.

Regulators announced in April that financial institutions would not have to comply with the rule until mid-2014 at the earliest, after several top regulators said they did not expect to have a final rule in place by the July deadline stated in the law.