Economic effect of the Volcker rule


The Volcker rule -- as currently proposed -- would prohibit U.S. banks from speculative proprietary trading (trading for their own accounts), among other activities. It applies not only to U.S. banks but also to any foreign bank with U.S. operations or any foreign branch of a U.S. bank. Comments on the proposed rule were due by Feb. 13.

Estimates of the economic effect of the Volcker rule include:

  • Cost U.S. businesses up to $315 billion
  • Increase borrowing costs up to $43 billion per year
  • Require 6,600,000 hours for implementation
  • Dramatically reduce liquidity
  • Lower investment returns for mutual fund, pension plans, etc.
  • Increase the cost of credit for consumers
  • Put U.S. banking institutions at a competitive disadvantage

For more information about the economic effect of the Volcker rule, read this week's Fast Facts.

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