Waters Applauds Volcker's Authors for Strong Rule
At today’s Financial Services Committee hearing featuring the five agencies charged with promulgating the Volcker Rule, Congresswoman Maxine Waters (D-CA), top Democrat on the Committee, commended regulators for working to put forth a strong rule that will ensure a more stable financial system.
Passed as part of the Wall Street Reform Act, the Volcker Rule ensures taxpayer dollars are no longer used to protect banks from risky trading losses. In her opening remarks, Waters underscored the importance of a strongly implemented and enforced Volcker rule, and commended regulators for working collaboratively across agencies.
Witnesses included Daniel Tarullo, Governor of the Federal Reserve Board; Mary Jo White, Chairman of the Securities and Exchange Commission; Comptroller of the Currency Thomas Curry; Federal Deposit Insurance Corporation Chairman Martin Gruenberg; and acting chair of the Commodity Futures Trading Commission Mark Wetjen.
Waters’ full remarks are below.
As prepared for delivery:
Thank you, Mr. Chairman. I’d like to welcome our distinguished witnesses to today’s hearing, and thank them for working tirelessly to complete this crucially important rule. Thanks to their hard work, we are making progress toward a stronger, sounder financial system.
It’s been five years since the worst of the financial crisis – and our nation is still taking stock of the causes and the damage done. Though we can’t identify every cause of the crisis with absolute certainty, we do know that certain types of risky behavior were major contributors.
One of these types of behavior was proprietary trading by big banks, of which we saw a significant increase in the buildup to the collapse. In fact, at the biggest banks, proprietary trading revenues steadily increased in the lead-up to the crisis, as banks acquired massive positions in subprime mortgage-backed securities. These positions were tremendously profitable, until the music stopped and the market for these securities crashed. And we now know that losses from proprietary trading, among other factors, required taxpayers to step in to bailout the system.
After the worst of the crisis, Congress enacted comprehensive Wall Street Reform to ensure such an emergency would never happen again. Undoubtedly, a centerpiece of that reform was the Volcker Rule.
I believe that a properly enforced Volcker rule will protect American taxpayers from the consequences of risky bank behavior, and make certain that banks insured by our nation’s citizens get back to the core business of making loans and financing our small businesses.
To our regulators who are here today, I commend you for working together so closely to ensure we have the strongest, most workable rule possible. During this important rulemaking, you have sought feedback from stakeholders across the spectrum, pouring through tens of thousands of comments and holding dozens upon dozens of meetings.
At the same time, you have already worked quickly and effectively to address issues related to the Rule that have come up in the last month, including the issue related to collateralized debt obligations backed by Trust Preferred Securities.
I’m very pleased with how you've managed to work collaboratively across your agencies. And given that the strong and consistent enforcement of the Volcker Rule is one of my top priorities, I am even more pleased that you have formed a “working group,” which will allow your agencies to better coordinate on implementation of the Rule across the financial sector.
My understanding is that your agencies have already begun work, holding an initial meeting to discuss coordination of responses and supervision of financial institutions.
This type of cooperation is to be commended, and is critical to ensure that the agencies’ implementation of the Volcker Rule is strong, coordinated and effective.
Simultaneously, I hope that your agencies will take advantage of the long lead-up time afforded to you to collect data from banking entities, which will inform how best to coordinate enforcement.
I’d like to once again thank the witnesses for appearing before this committee today. I look forward to working with you to ensure our regulators are faithfully enforcing this Rule, which is crucial to the success of the Wall Street Reform Act.
I look forward to the witnesses’ testimony and I yield back.