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Why the Volcker Rule is a Useful Tool for Managing Systemic Risk

Why the Volcker Rule is a Useful Tool for Managing Systemic Risk

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Published by: EKAI Center on Aug 21, 2012
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10/04/2013

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_f~ xfm Uigljmt T}gm N| c ]|me}g Xiig eit Ac`con`o \~|xmanl Tn|j
D~ Acxxfmw Tnlfcth|i`
3
 @^] \xmt` \lfiig ie D}|n`m||\}aact~;
C` irxnacg tmo}gcxni` rignl~ eit en`c`lncg n`|xnx}xni`| wi}gh dm xi fcum xfi|m enta| n`xmt`cgn{mxfm li|x| ie |~|xmanl tn|j xfcx xfm~ rtih}lm C` i}xliam ie |}lf tmo}gcxni` wi}gh gmch xi xfm|menta| itoc`nlcgg~ lfii|n`o xi dm gm|| gmumtcomh c`h fighn`o gm|| tn|j~ c||mx ri|nxni`| N` gnm} ie xfn| crrticlf xi en`c`lncg tmo}gcxni`' c `cx}tcg cgxmt`cxnum wi}gh dm xi hntmlxg~ nari|m lcrnxcgtms}ntmam`x| c`h tm|xtnlxni`| i` c||mx fighn`o| Xfm tmo}gcxni` m`clxmh h}tn`o xfm gc|x ackiten`c`lncg ltn|n| n` xfm 3><2|
' `camg~ xfm Dc`jn`o Clx ie 3><< &”Ogc||
!
\xmcocgg― Clx.' eiggiwmh
xfn| rcxf \i xii him| xfm Hihh!Etc`j Clx wnxf nx| marfc|n| i` lcrnxcg tmo}gcxni` c`h xfmUigljmt t}gmXfn| wfnxm rcrmt mvrgcn`|;3
 
wf~ etia c` mli`ianl rin`x ie unmw xfm Uigljmt t}gm acjm| |m`|m c| c tmo}gcxit~xiig4
 
wf~ lcrnxcg tms}ntmam`x| ctm `ix c rc`clmc eit en`c`lncg tmo}gcxni` c`h n`|xmch xfm`mmh xi |}rrgmam`x xfma wnxf Uigljmt t}gm x~rm tm|xtnlxni`| \rmlnenlcgg~' lmtxcn`x~rm| ie c||mx fighn`o|' |}lf c| xfi|m rti`m xi tmo}gcxit~ ctdnxtcom' lctt~ xtchm| c`hen`c`lncg o}ctc`x~ n`|}tc`lm' ctm ngg |}nxmh eit lcrnxcg tmo}gcxni`<
 
wf~ |iam ie xfm tmlm`x cto}am`x| tmocthn`o xfm narclx i` lcrnxcg actjmx gns}nhnx~ ie xfm Uigljmt t}gm clx}cgg~ rtiunhm |}rritx' `ix irri|nxni`' eit xfm Uigljmt t}gm8
 
wf~ xfm cto}am`x xfcx xfm Uigljmt t}gm gnanx| hnumt|nenlcxni` c`h n`ltmc|m| |~|xmanltn|j n| c riit i`m=
 
wf~ xfm Uigljmt t}gm `mmh| xi dm rtn`lnrgm!dc|mh wnxf |cem fctdit| c| irri|mh xi c|xtnlxg~ t}gm!dc|mh crrticlf Xfm tmc|i` tmgcxm| lgi|mg~ xi xfm l}ttm`x hmdcxm i` wfcxli`|xnx}xm| rtn`lnrcg xtchn`o umt|}| actjmx acjn`o
3
Acxxfmw Tnlfcth|i`' Lfctgm| M \nai` Rtiem||it ie Crrgnmh En`c`lncg Mli`ianl|' Hntmlxit ie xfm \cgiai` Lm`xmteit xfm \x}h~ ie En`c`lncg N`|xnx}xni`|' @^] \xmt` \lfiig ie D}|n`m||' c`h li`|}gxc`x xi Aitoc` \xc`gm~ \iam ie 
xfm nhmc| eit xfn| wfnxm rcrmt liam etia @^] \xmt`„| diij i` c`cg~{n`o xfm Hihh
!Etc`j Clx ie wfnlf N wc| i`m ie xfm ei}t li!
mhnxit|' ‗Tmo}gcxn`o _cgg \xtmmx; Xfm Hihh
!
Etc`j Clx c`h xfm `mw Ctlfnxmlx}tm ie Ogidcg En`c`lm'‑ n`
rctxnl
}gct' Lfcrxmt ? ‗Gctom Dc`j| c`h xfm Uigljmt T}gm‑ &li
!c}xfitmh wnxf Ti~ \anxf c`h N`oi _cgxmt. Xfn|lfcrxmt hm|ltndm| xfm fn|xit~ ie Ogc||!\xmcocgg c`h fiw xi li`|nhmt xfm Uigljmt t}gm n` xfn| li`xmvx _fngm N fcumdmm` c li`|}gxc`x eit c xtchn`o oti}r w
nxfn` Aitoc` \xc`gm~ eit ? ~mct|' `mnxfmt xfn| wfnxm rcrmt `it @^] \xmt`„|
ixfmt witj i` xfm en`c`lncg ltn|n| fc| dmm` tmunmwmh it |}danxxmh xi c`~ ieenlncg| cx Aitoc` \xc`gm~
 
N.
 
Xfm Mli`ianl| ie xfm Uigljmt T}gm
Xfm mli`ianl xfmit~ ie tmo}gcxni` n| umt~ lgmct Tmo}gcxm wfmtm xfmtm n| c actjmx ecng}tm Nx n|crrctm`x xfcx c ackit actjmx ecng}tm n` xfn| ltn|n| wc| xfm mamtom`lm ie |~|xmanl tn|j Aitmli`ltmxmg~' |~|xmanl tn|j mamtomh wfm` cootmocxm lcrnxcgn{cxni` ie xfm en`c`lncg |mlxit dmlcamgiw Xfm n`x}nxni` eit wf~ xfn| n| c rtidgma n| |xtcnofxeitwcth _fm` c en`c`
lncg enta‖| lcrnxcg n|
giw' nx n| hneenl}gx eit xfcx enta xi rmteita en`c`lncg |mtunlm|: c`h wfm` lcrnxcg n| giw n` xfmcootmocxm' nx n| `ix ri||ndgm eit ixfmt en`c`lncg enta| xi |xmr n`xi xfm dtmclf Xfn| dtmcjhiw` n`en`c`lncg n`xmtamhncxni` n| xfm tmc|i` |mumtm li`|ms}m`lm| ill}ttmh n` xfm dtichmt mli`ia~_fm` en`c`lncg enta| xfmtmeitm tc` coti}`h h}tn`o xfm ltn|n| rmtnih' xfm~ li`xtnd}xmh xi xfmcootmocxm |fitxecgg' gmchn`o xi li`|ms}m`lm| dm~i`h xfm enta nx|mge Xfm enta fc| `i n`lm`xnum xiac`com xfm |~|xmanl tn|j Xfm `mocxnum mvxmt`cgnx~ c||ilncxmh wnxf |}lf tn|j| nargnm| xfcx rtnucxmactjmx| lc``ix meenlnm`xg~ |igum xfm rtidgma' |i oiumt`am`x n`xmtum`xni` n| tms}ntmhXfm Hihh!Etc`j Clx an||mh xfm irritx}`nx~ xi env xfm `mocxnum mvxmt`cgnx~ ie |~|xmanl tn|j d~nari|n`o xfm |xc`hcth mli`ianl |ig}xni` ie xcvn`o |}lf c` mvxmt`cgnx~
4
N` ixfmt with|' xfmtm|fi}gh dm c` chhnxni`cg emm' |}tlfctom it rtman}a xfcx n| xnmh |rmlnenlcgg~ xi xfm |~|xmanl tn|j ie en`c`lncg n`|xnx}xni`| c| xfm|m |~|xmanl ecng}tm| dmct li|x| i` xfm tm|x ie xfm en`c`lncg |mlxit c`hxfm tmcg mli`ia~ &mo' Clfct~c' Rmhm|m`' Rfngnrri` c`h Tnlfcth|i` &4232.. N` ithmt xi cuinhxfm|m emm|' xfm|m enta| wi}gh itoc`nlcgg~ dmliam gm|| |~|xmanl d~ lfii|n`o gm|| gmumtcom c`hfighn`o c||mx| xfcx fcum gm|| cootmocxm xcng tn|jN`|xmch' xfm Hihh!Etc`j Clx |mmj| xi tmo}gcxm |~|xmanl tn|j d~ |mxxn`o }r c `}admt ie dcttnmt|'xwi ie wfnlf ctm rctxnl}gctg~ naritxc`x' `camg~ m`fc`lmh lcrnxcg tms}ntmam`x| c`h xfm rtn`lnrcgxtchn`o tm|xtnlxni` ie xfm Uigljmt t}gm Xfn| wc~' xfm Hihh!Etc`j Clx lc` dm li`|nhmtmh c|mli`h!dm|x |ig}xni` d~ fcth wntn`o gmumtcom li`|xtcn`x| c`h tm|xtnlxni`| i` tn|j!xcjn`o clxnunxnm|Him| fn|xit~ xmgg }| c`~xfn`o cdi}x wfmxfmt xfn| n| c tmc|i`cdgm crrticlf xi tmo}gcxn`o xfmen`c`lncg |mlxit9
 
N` xfm mctgnmt rctx ie xfm lm`x}t~' mo' h}tn`o xfm Rc`nl ie 3>2? c`h xfm uctni}|dc`jn`o rc`nl| dmxwmm` 3><2!3><4 n` xfm wcjm ie xfm Otmcx Hmrtm||ni`' }`lmtxcn`x~ c`h gclj ie n`eitacxni` cdi}x wfnlf en`c`lncg n`|xnx}xni`| wmtm n`|igum`x gmh xi |~|xma!wnhm dc`j t}`| N`tm|ri`|m xi xfm|m |~|xmanl t}`|' xfm oiumt`am`x ltmcxmh xfm Emhmtcg Tm|mtum wnxf nx| gm`hmt ie gc|x tm|itx eclngnx~' xfm EHNL c`h hmri|nx n`|}tc`lm' cgi`o wnxf c `}admt ie dc`jn`o c`hn`um|xam`x clx| Cto}cdg~' xfm ai|x naritxc`x rctx ie xfm gmon|gcxni` wc| xfcx hmri|nxit| `igi`omt fch xi t}` i` xfm dc`j dmlc}|m xfm oiumt`am`x o}ctc`xmmh xfm e}`h|Ie li}t|m' nx n| wmgg }`hmt|xiih xfcx xfn| |cemx~ `mx ltmcxm| c aitcg fc{cth' xfcx n|' c` n`lm`xnumeit xfm dc`j xi }`hmtxcjm otmcxmt tn|j xfc` nx wi}gh ixfmtwn|m wi}gh wnxfi}x xfn| n`|}tc`lm Iumtxnam' tmo}gcxit| c`h rignl~acjmt| xfmtmeitm |mx }r c `}admt ie li}`xmtucngn`o dcttnmt|; &n. dc`j|wi}gh fcum xi rc~ xi dm c rctx ie xfm hmri|nx n`|}tc`lm |~|xma' |i' cx gmc|x' i` c`
mv c`xm
dc|n|'tmo}gcxit| xiij n`xi clli}`x xfm li|x ie xfm n`|}tc`lm' &nn. xfm tn|j!xcjn`o clxnunxnm| ie dc`j| wmtm
4
 
Nx n| n`xmtm|xn`o xi `ixm xfcx' n` xfm Fi}|m umt|ni` ie xfm rtml}t|it dngg xi Hihh!Etc`j' |}lf c rtiun|ni` wc|n`lg}hmh
 
tn`o!em`lmh xi xfm mvxm`x xfcx xfmtm wc| c |mrctcxni` ie xfm liaamtlncg c`h xfm aitm tn|j~'n`um|xam`x dc`jn`o clxnunxnm|' c`h &nnn. m`fc`lmh |}rmtun|ni`' c`h wn`hn`o!hiw` rtiun|ni`|' ie n`hnunh}cg dc`j|' om`mtcgg~ n` xfm eita ie lcrnxcg tms}ntmam`x| c`h rtiarx littmlxnum clxni` wc|m|xcdgn|fmhI`m crrticlf chuilcxmh d~ xfm Unljmt| Tmritx n` xfm ]J wi}gh dm xi tn`oem`lm hiam|xnl tmxcngdc`jn`o |mtunlm| etia ogidcg wfigm|cgm)n`um|xam`x dc`jn`o wnxf xfm tn`oem`lmh dc`j dmn`ogmocgg~ c`h irmtcxni`cgg~ |mrctcxm wnxf c fnofmt lcrnxcg tms}ntmam`x \rmlnenlcgg~' xfm Unljmt|T
mritx &4233. li`lg}hm| xfcx ”c
`}admt ie ]J dc`j| liadn`m hiam|xnl tmxcng |mtunlm| wnxfogidcg wfigm|cgm c`h n`um|xam`x dc`jn`o irmtcxni`| Dixf |mx| ie clxnunxnm| ctm mli`ianlcgg~ucg}cdgm wfngm dixf cg|i m`xcng tn|j|
 “ 
eit mvcargm' tmgcxn`o xi tm|nhm`xncg rtirmtx~ ucg}m| n` xfmlc|m ie tmxcng dc`jn`o Xfmnt }`|xt}lx}tmh liadn`cxni` him|' fiwmumt' onum tn|m xi r}dgnl rignl~li`lmt`|' wfnlf |xt}lx}tcg tmeita rtiri|cg|
 “ 
`ixcdg~ eita| ie |mrctcxni` dmxwmm` tmxcng dc`jn`oc`h wfigm|cgm)n`um|xam`x dc`jn`o
 “ 
|mmj xi chhtm||
 Xfm Uigljmt t}gm xcjm| c` cgxmt`cxnum' ~mx tmgcxmh' crrticlf xi ac`con`o xfm tn|j| ie gctomliargmv dc`j| d~ tm|xtnlxn`o lmtxcn` ~rm| ie xtchn`o clxnunxnm| N` xfn| |m`|m' xfm Uigljmt t}gm lc`dm unmwmh c| c |m`|ndgm crrticlf xi anxnocxn`o aitcg fc{cth c`h rtmum`xn`o xfm |~|xmanl tn|j d}ngh}r clti|| dc`jn`o n`|xnx}xni`| c`h `i`!dc`j |~|xmanlcgg~ naritxc`x en`c`lncg n`|xnx}xni`|&\NEN|. wfm` xfm|m enta| ecgg }`hmt xfm oiumt`am`x |cemx~ `mx
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 N` eclx' Rc}g Uigljmt' xfm fnofg~ tm|rmlxmh eitamt Emhmtcg Tm|mtum lfcntac`' fch gi`o }tomh xfcxxfm |lirm ie c`~ nargnlnx emhmtcg o}ctc`xmm dm gnanxmh xi c tmgcxnumg~ |acgg `}admt ie naritxc`xdc`jn`o n`|xnx}xni`| c`h xi litm dc`jn`o e}`lxni`|' tcxfmt xfc` mvxm`hmh clti|| xfm |rmlxt}a ie en`c`lncg n`xmtamhnctnm| c`h tn|j~ clxnunxnm| N` mvlfc`om eit xfm dc`jn`o |cemx~ `mx' Uigljmttmliaam`hmh xfcx dc`j| dm cggiwmh xi m`ocom n` xfm e}gg tc`om ie liaamtlncg c`h n`um|xam`xdc`jn`o e}`lxni`| c| en`c`lncg n`xmtamhnctnm|' d}x `ix dm rmtanxxmh xi m`ocom n` |}lf `i`dc`jn`oclxnunxnm| c| rtirtnmxct~ xtchn`o' rtn`lnrcg n`um|xn`o' liaaihnx~ |rml}gcxni`' c`h fmhom e}`h c`hrtnucxm ms}nx~ e}`h ac`comam`x Xfm|m clxnunxnm| li}gh dm |r}` iee xi `i`dc`j c||mxac`comam`x enta| c`h wi}gh dm |}dkmlx xi wfcxmumt tmo}gcxni` n| `mlm||ct~ eit xfi|m x~rm| ie n`|xnx}xni`| Xfm gmocl~ dc`j| wi}gh dm cggiwmh xi fcum `i mli`ianl n`xmtm|x n` xfm |r}`!iee m`xnxnm|N` ixfmt with|' wfcx |m`|m him| nx acjm eit en`c`lncg n`|xnx}xni`| xi dm cdgm xi n`um|x i` xfmnt iw`clli}`x wfm` xfm|m n`|xnx}xni`| lc` en`c`lm xfmnt clxnunxnm| cx dmgiw!actjmx tcxm| h}m xi xfmoiumt`am`x |cemx~ `mx9 Xfm|m hn|xitxni`| ill}t `ix i`g~ cx dc`j| wnxf cllm|| xi EHNL n`|}tc`lm'd}x cg|i wnxf tm|rmlx xi xfm oiumt`am`x |ri`|itmh m`xmtrtn|m| gnjm Ec``nm Acm c`h Etmhhnm Aclc`h ixfmt xii!dno!xi!ecng gctom' liargmv' en`c`lncg n`|xnx}xni`|C `cx}tcg s}m|xni` n| wfcx n| |i |rmlncg cdi}x rtn`lnrcg xtchn`o c`h nx| li`xtnd}xni` xi |~|xmanltn|j umt|}| ixfmt clxnunxnm| fi}|mh cx dc`jn`o n`|xnx}xni`|9 N`hmmh' onum` nx| cootmocxm tn|j 
liari`m`x' c dc`j‖| ritxeigni| ie gic`| n| gnjmg~ xi hi riitg~ n` c ltn|n| c`h chh xi xfm iumtcgg
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Xfm Uigljmt t}gm crrgnm| xi `i`dc`jn`o \NEN| d~ rixm`xncgg~ |}dkmlxn`o xfm|m enta| xi chhnxni`cg lcrnxcgtms}ntmam`x| c`h s}c`xnxcxnum gnanx| i` rtirtnmxct~ xtchn`o Eit xfm tm|x ie xfn| wfnxm rcrmt' N tmemt
xi ‗dc`j|‑ d}x
nx |fi}gh dm lgmct xfcx xfm cto}am`x| mvxm`h xi \NEN| \rmlnenlcgg~' c `}admt ie xfm rtiunhmh mvcargm| n`lg}hm `i`!dc`j \NEN|

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