Obama Sending The Volcker Rule To Congress?

President Obama may be sending a draft of the so-called "Volcker Rule" to Congress as early as today, according to Bloomberg. That's the proposal which would prevent banks from proprietary trading and limit their liability exposure. Although the Treasury wouldn't comment officially to Bloomberg, it received a summary from a Treasury source to accompany the legislation that the President will urge lawmakers to adopt. While interesting to note, I think it's mostly political posturing, as I would be shocked if the proposal made its way back to President Obama's desk for his signature.

Bloomberg says:

Obama will ask lawmakers to bar banks from trading solely for their own profit and limit company size by expanding a 10 percent cap on deposit share to include other funding sources, according to a draft summary obtained by Bloomberg News. It also would tighten supervision and capital and liquidity requirements on non-bank companies engaged in proprietary trading, according to the summary.

Lawmakers, however, will probably mostly ignore the proposal. The trouble the Senate is having getting any financial regulation done is very well-known at this point. The possibility that Banking Committee members would derail the progress they've made by adding in these very controversial changes is pretty unlikely. Of course, anything as contentious as the Volcker Rule will have a much better chance of becoming law if wrapped up in a big bill, so the likelihood of its passing separately after broader legislation is adopted seems even minuter.

But this does put the onus on Congressional Democrats to act. I'll be curious to see how they respond. We've already heard Sen. Dodd's annoyance with the President mucking up the reform effort with this proposal. So this draft may just be left on a shelf in the Capitol somewhere to collect dust. While the President could demand that any final legislation contain the proposal as a prerequisite for his signature, I think that's too strong a stance to maintain. This is, after all, politics. Less aggressive regulation would be better than nothing.