Congressman Lamb’s First Vote
Congressman Lamb voted to weaken the Volcker Rule. Here’s what it is, why we need it, and why we deserve an explanation.
On Thursday, Congressman Lamb was sworn in to congress. On Friday, in his first vote as an elected official, he voted to weaken the Volcker Rule, an important banking reform that protects consumers from reckless speculation.
The Volcker Rule was implemented as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Obama-era response to the 2008 financial crisis.
The Volcker rule, finalized three years after the Dodd-Frank financial reform law passed in the wake of the 2007–2009 financial crisis, restricts U.S. banks from making certain kinds of speculative transactions on their own account and from investing in hedge funds.”— Reuters
On Friday, Congressman Lamb voted for the “Volcker Rule Regulatory Harmonization Act,” which amends the Volcker rule to:
1) “give the Board of Governors of the Federal Reserve System sole rulemaking authority,” and
2) “exclude community banks from the requirements of the Volcker rule”
1. Limiting Regulatory Authority to the Federal Reserve
Currently, five regulators handle compliance of the Volcker Rule:
- The Federal Reserve (“the Fed”)
- The Office of the Comptroller of Currency
- The Commodity Futures Trading Commission
- The Securities and Exchange Commission (SEC)
- The Federal Deposit Insurance Corporation (FDIC)
The Volcker Rule rollback reduces the number of fiscal watchdogs from five to just one — the Fed. Supporters of the rollback include Congressman Keith Rothfus, who released a statement saying that, “the bill removes a significant source of confusion for financial institutions that are already struggling to deal with a complicated regulatory environment”
The rollback, backed by the American Banking Association, may streamline the process for banks to demonstrate compliance with the rule, but it also streamlines the process for Trump appointees at the Fed to change the rule by eliminating the four other “checks” in the process.
While Fed Vice Chairman Randal Quarles, the central bank official in charge of overseeing Wall Street, has said that “material changes” are already underway, there isn’t yet consensus among all five agencies on how to proceed. — Bloomberg
Once signed into law, Trump-appointee Randal Quarles won’t need consensus from the four other fiscal watchdogs. He’ll be free to implement President Trump’s deregulatory agenda uninhibited by the SEC or FDIC. In fact, if he really wanted to, he could “simply stop enforcing it.”
2. Exempting Community Banks from the Volcker Rule
The second plank of the Volcker rollback provides an exemption for banks with less than $10 billion dollars in assets and with trading activity totaling less than 5% of those assets (an effective limit of $500 million). Proponents of H.R. 4790 claim that this exemption is necessary to provide “relief” to community banks.
H.R. 4790 also provides meaningful relief to community banks — which did not cause the financial crisis — by clarifying that Main Street banks should not be subject to the Volker Rule, which was meant to rein in the largest and riskiest financial institutions. — Congressman Keith Rothfus
Thomas M. Hoenig, Vice Chairman of the FDIC, disagrees. He contends that the “community bank” rationale is rooted not in the concerns of local banks, but in the messaging strategy of those who want to pass “broader rollbacks of the Volcker Rule.”
I am disappointed that the Volcker Rule continues to be characterized as a burden to community banks and allegedly is prohibiting them from taking part in fintech investment opportunities. This argument appears misleading and for the purpose of implementing broader rollbacks of the Volcker Rule. I regularly meet with hundreds of community bankers from around the country, and while they voice major concerns about regulatory burden, the Volcker Rule is not one they highlight. — Thomas M. Hoenig in the American Banker
Even in the exception itself, he sees loopholes that would allow banks to violate the intent of the 5% trading activity limit.
Mr. Hoenig said he sees a loophole in how the Senate rule defines the 5% limit on banks’ trading activity. The bill’s definition of trading assets and liabilities would include short-term, speculative trades, but not longer-term trades, he says. — WSJ
Silence of the Lamb
In a vote of 300–105, Congressman Lamb joined his GOP colleagues and a minority of Democrats in supporting the legislation.
Congressman Rothfus and Democratic Minority Leader Pelosi issued statements in support and opposition of the Volcker rollback, respectively. The other local congressman, Representative Doyle, voted against the rollback as expected. He did not release a statement.
Neither did Congressman Lamb, who voted for the rollback instead of against it. Granted, he was just sworn in Thursday and has since then only released one press release.
Whatever the reason may be, both his current and desired constituents deserve an explanation for his vote. But now that he is unopposed in the primary, we may never get one.
16 April, 2018: This piece has been edited from its original publication to correct minor grammatical errors.