Occupy the SEC’s Comment Letter Objects to Excuses for Watering Down Volcker Rule (#OWS)

Yves here. No one should be surprised that Bloomberg is reporting today that Goldman is aggressively lobbying for a Volcker Rule waiver for its role as a sponsor of and investors in “credit funds.” Update: Andrew Ross Sorkin predictably parrots industry talking points.

By George Bailey, who has worked in senior compliance roles at a Big Firm You’ve Heard Of and is also a member of Occupy the SEC

Today is “Volcker Day” and Paul Volcker was on a tear.

Mr Volcker added in a formal submission to regulators Monday that “proprietary trading is not an essential commercial bank service that justifies taxpayer support,” and that banks should stop “stonewalling.”

He went on to say,

“There should not be a presumption that evermore market liquidity brings a public benefit,” Volcker, 84, wrote in a letter submitted yesterday to regulators in defense of the rule curtailing banks’ bets on asset prices with their own money. “At some point, great liquidity, or the perception of it, may itself encourage more speculative trading
(See here and here for the full story.)

But then Jamie Dimon came along and slapped Tall Paul. Ouch.

“Paul Volcker by his own admission has said he doesn’t understand capital markets,” Dimon told Francis in the Fox Business interview. “He has proven that to me.”

SIFMA, on behalf of the industry, took over to explain in detail just what it is that Mr. Volcker doesn’t understand in their comment letter. They reiterate their dire warning about the devastating effects on ‘corporate liquidity‘ from the Volcker Rule. Yet surprisingly, no non-financial corporate bond issuers filed any comments to acknowledge or object to this danger. In fact, there are no comment letters from any non-financial companies. They did haul out the widely lampooned Oliver Wyman study to bolster their comment that ‘corporate’ America would suffer horribly if Volcker is enacted. But that just serves to remind us again that the corporate bond liquidity that will be affected is the liquidity in dodgy financial company ‘corporate’ bonds, like CDOs and other drek. They conclude the only solution is a rewrite. They request the rule makers go back and start all over again.

The SIFMA comment letter runs to 175 pages. I haven’t read all the other financial company letters, but the ones I’ve skimmed conform to SIFMA’s position.

The Occupy the SEC comment letter logs in at 325 pages and oddly enough draws the exact opposite conclusions to each of SIFMA’s objections. It’s an interesting contrast. For some reason (some familiarity with the subject matter and public interest primarily) the group seems to have understood and articulated Volcker’s (and the electorate’s) intent pretty effectively (because this is a large document, we suggest you download it if you’d like to peruse it).

Occupy the SEC Comment Letter on the Volcker Rule

Of the comment letters received about 90% are from financial institutions, and another 5% are from foreign governments objecting to the priority the US regulators have gifted to US traders in US Government Bonds. The remaining 5% are from ordinary folks, like Mr. Volcker, Occupy the SEC and other public interest groups.

It’s interesting that 95% of the comments reflect the views of the 1%, and the views of the 99% are embodied in the comments of the remaining 5% of commenters.

I’m confident the regulators will recognize that, for all its complexity, the rules are comprehensible and can be refined to serve the public’s demand for control over a runaway financial system.

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  1. psychohistorian

    Our runaway financial system is a feature in their eyes, not a fault.

    The SEC has become the addled lap dog of the industry they are supposed to regulate.

    1. jake chase

      Sorry to tell you the SEC has been a toothless tiger since Roosevelt appointed Joe Kennedy to head it. The agency is our foremost example of hiring goats to guard the cabbage patch. It beats up on provincial con men and makes it impossible for small companies to raise money. Meanwhile, Wall Street employs its alleged scrutiny as a public relations tool (we have to be honest with the SEC watching over us). Writing letters to the SEC is just wasted effort. The fix was in long ago.

  2. C

    “I’m confident the regulators will recognize that, for all its complexity, the rules are comprehensible and can be refined to serve the public’s demand for control over a runaway financial system.”

    Really? With us “looking forward” on bank fraud you feel that they will actually make the right call here?

    1. Doug Terpstra

      I choked on Mr. Bailey’s conclusion too at first, until I realized that was surely meant to be accompanied by the falsetto laughter of Pink Floyd’s lunatic. It might also have been a veiled appeal to coax out some last vestige of integrity and humanity that might still reside in the dark recesses of the SEC, the OCC, or the Criminal Reserve. Racket memebers might be blind to the sarcasm in Bailey’s confidence in regulators after three years of unfettered looting and currency counterfeiting.

      1. enouf

        three years of unfettered looting and currency counterfeiting.

        you forgot to type the word HUNDRED in there ;-)

        Yes, 300+ years! .. think back to the formation/chartering of the Bank Of England circa ~1698, IIRC


        1. Skippy

          Counterfeiting has been around since weights, measures and scales.

          Skippy… its like talking to someone that only goes back 5,000 years.

    2. George Bailey

      Just so there’s no confusion, Doug translates the concluding paragraph exactly as it was intended to be understood.


  3. Mark P.

    ‘The remaining 5% are from ordinary folks, like Mr. Volcker, Occupy the SEC and other public interest groups.’

    Volcker is ordinary folks like George Kennan, Henry Kissinger, Daniel Ellsberg or Thomas Schelling are/were ordinary folks.

    For an American policy architect on that level — where very little ideology but brutally calculated, big-picture realism ever held or holds sway — to enter battle against the U.S.’s own financial sector is a striking sign of the state of things. As is the fact that both Red and Blue teams in Washington seem to be doing their best to ignore him.

  4. craazyman

    Even From the Back of the Class You Can Still See the Chalkboard!

    btw, do they even use blackboards in class anymore? or do all the kids stare at a computer screen — like we all do — ruining their eyes and their minds at the same time. we don’t ruin our minds, unless we’re banksters and the screen is a trading terminal. Terminal. how about it? but anyway.

    325 pages! I guess that’s what it takes these days to make sense of lobbyists nonsense.

    It occurred to me that traders all work in an open office environment, so it’s no wonder they’ve lost their minds even while their bank accounts suffer from terminal obesity.

    what if your bank account weights 890 pounds and requires continual hospitalization in a financial institution where it can get hooked up to a liquidity IV while it lays there watching financial talk shows. is that living? Oh man, the pain, the pain.

    At least Tall Paul is a fly fisherman and a gentleman. The fishing part helps, I’m sure, to clear his head.

  5. Woodrow Wilson

    Decades from now, your children or grandchildren, nieces and nephews will ask:

    “Mom/Dad/Auntie/Uncle, why didn’t you do anything besides write letters and use harsh language?”

    In the meantime, 500+ career & corrupt politicians will continue to usurp centuries old law, kneeling down in front of their Banking Cartel & corporate masters, while plundering the pacified, brainwashed and in general weak Citizenry.

  6. Richard


    Based on my experience with comments on the European Capital Requirements Directive Article 122a, regulators in fact focus their attention on the 95% of the comments that represent the 1%.

    In addition, these comments are only the tip of the iceberg for lobbying by the banks and their lobbyists.

    1. aletheia33

      TPTB can ignore the comment, but cannot ignore, even as they toss aside the comment, that occupy the SEC exists, or the qualifications of the people who have come together in it. they can ignore the fruit of the group’s hard work, but they cannot fail to perceive that it has been done and by whom.

      this work has already had and will have consequences of various kinds well beyond the immediate, worthy contents of the document itself.

      regarding not doing anything besides writing letters and using harsh language. how many more children will say: mom and dad (etc.), why did you not even write just one letter?

    2. George Bailey

      A small group of people decided to sit down and write a contra SIFMA version of a full bore (pun intended)comment letter, so maybe things have reached a new pass. It wasn’t even that hard. Have a read before despairing of its effectiveness. A group of volunteers spent 3 mos, at no cost other than their time, to present the other side of an argument the industry spent millions on. Simon Johnson tore SIFMA a new one at the Congressional hearings for their liquidity argument last month, yet SIFMA still retained the argument as a central component in their objection. Volcker is simply shouting BS to the bankers. A decidely non-fringy group took 325 pages to argue substantively that the regulators shouldn’t back down and implement the law on behalf of its public constituency.

      Here’s a summary of the resources the industry threw at this.

      The pushback against the Volcker Rule is the latest effort under way on Wall Street to mute the impact of Dodd-Frank. But the campaign against the Volcker Rule is more pronounced than banks’ earlier attempts to temper new regulations for lending and derivatives.

      Wall Street firms, lawyers and trade groups churned out many Volcker Rule appeals. The Securities Industry and Financial Markets Association, or Sifma, hired the law firm Davis Polk to write multiple pitches to regulators. A hodgepodge of Wall Street trade groups led by Sifma alone filed five comment letters on Monday, including one document that spanned 173 pages. A regulatory comment letter normally runs 10 to 20 pages. During the writing period, most big banks formed internal Volcker Rule “task forces,” often led by risk officers and lawyers, to coordinate the effort across trading desks and divisions, people briefed on the efforts said.
      “I’ve never seen a rule-making response like this before,” said Derek M. Bush, a partner at the law firm Cleary Gottlieb who helped write comment letters for banks and financial industry groups.

      Wall Street’s biggest banks even submitted their own comment letters, taking an unusually aggressive stance that underscored the importance of the issue. Ordinarily, banks prefer to have trade groups and lobbyists do the talking for them.


      1. Woodrow Wilson

        Your post epitomizes my point over time here on NC.

        Politicians and The Banking Cartel and any of those they enable do not live in fear. Fear from repercussions of looting and pillaging, and profiteering at the expense of The Citizenry. There is zero incentive for them to stop. What do they care about peaceful protestors and terse letters?

        Meanwhile, The Citizenry lives in daily fear if they still have a job, can they afford a roof over their head, can they feed their kids? The retirement they thought they had, has to be put off because it was raided by the very people we’re discussing, maybe they’re incapable of working anymore.

        There sure as fuck a lot to be angry about, but until that fear is instilled with those who make or usurp the laws, and enable this kind of looting, it will continue indefinitely.

        Until we get even a percentage of Americans that are willing to make the sacrifices necessary for that kind of change, whether it be jail or even death, enjoy being pillaged to your graves.

        But keep those harsh letters coming, I’m confident it will work. In a Banana Republic/Plutocracy/Kleptocracy, those letters are given the fullest attention.

        1. craazyman

          what about peanut gallery comments?

          I don’t think they do much, except crack me up.

          but at least that’s something positive. better than a psychiatric bill every week.

          I’m glad somebody wrote that lettter, personally I couldn’t do it if I had to. sometimes evil dies by a hundred thousand cuts and that letter is 325 of them. it’s something.

        2. Jill

          Woodrow Wilson,

          I just ask you to consider that people have different abilities and different life situations. Some people are able to put together a letter that explains the situation in plain language to those of us who may not understand what is really going on that well. This will enable us to explain the situation to others and so on…

          As another poster pointed out, the banks are worried enough about this letter to pull out their hired guns. That alone tells me this letter is an important.

          I have always believed that if every person did what they could, that matters. Some people can get arrested, some can write, some use art, some can send money, some can speak out to their neighbors or write on blogs. It all matters.

          The govt. has to monitor blogs and their comments because they are scared, even of that. This govt. is terrified of its own population, that’s why they are restricting free speech as well as tear gassing protesters. It’s why Obama has brought back his “truth” squads (a truly amusing idea coming from him!).

          They want us out of the way. So far, they haven’t been successful. Honoring what each person can do, however small may not bring success in the end. After all we are facing a very powerful group of people with amazing resources at their disposal. But it seems that the more things people can do, the better chance we have. The moral authority of peaceful actions of every kind has brought down dictatorships before.

          1. PC

            Thank you Jill….your written response to Mr. Wilson’s futility should be a blog post in and of itself. I often find I am trying to convey the same sentiments to others over many subjects. You’ve expressed perfectly why everyone should get involved…no matter how small (or indirect) the effort.

          2. Mark P.

            Letter-writing and peaceful protests a la Gene Sharp have their necessary place, yes. But the enemy only submits to coming to the table and settling with protesters because they are driven by the fear of far worse if they don’t.

            In other words: inasmuch as, say, a MLK-type largely gets nowhere without a Malcolm X and some Black Panthers to put real fear into the hearts of a repressive, predatory establishment, Woodrow Wilson is right. We are going to have to face this.

  7. BondsOfSteel

    I never liked the Volcker rule. I’d rather see a reinit of Glass–Steagall.

    It’d be much harder to fight a law that was ineffect for over 50 years… and which happened to be the most stable 50 years in banking.

    IMHO, this is what OWS should be lobbying.

  8. Doug Terpstra

    It’s quite kosher for Jamie D to bitch slap an elderly patriarch like Volcker, who has certainly forgotten more about finance, fiduciary duty, and ethics than Jaime ever learned. Volcker, appointed by Carter, was never a real gang-bankster tribe member, and his chairmanship at the Criminal Reserve was an aberration that set back the agenda a couple of decades at least. Fortunately, with Ben Shalom Bernanke now heading the cartel, the moneychangers’ agenda is finally back on track. They certainly don’t want Volcker back mucking things up.

    Volcker is a heretic who wanted “to break up the giants. JPMorgan Chase would have to give up the trading operations acquired from Bear Stearns. Bank of America and Merrill Lynch would go back to being separate companies. Goldman Sachs could no longer be a bank holding company. It’s a tall order, and to achieve it Congress would have to enact a modern-day version of the 1933 Glass-Steagall Act, which mandated separation.”


    Volcker, demonstrating he has no grasp of Jamie’s finely-tuned understanding of capital markets, said “People say I’m old-fashioned and banks can no longer be separated from nonbank activity,” … “That argument,” he added ruefully, “brought us to where we are today.”

    Gasp! The man is a menace.

    1. enouf

      Absolutely BRILLIANT!

      Thank you so much for sharing this — I’m finally getting overwhelming feelings of HOPE! ..at long last!

      I wish F. Beard was around to see it — and i hope all here on NC and the entire Occupy Movement sees this, and especially any/all considering black bloc tactics ..and yes; anarchists need to also pull their heads out of their collective ass.


  9. James

    The crumbling of the edifice in real time is always a mystery to those who lack sight. Great change is underway as we speak grasshopper, can you not see it?

  10. Francois T

    Jamie Dimon should be trusted at face value?

    I don’t think so! This is why only CNBS and Fix Business “News” can stomach his bullshit with a straight face.

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