Volcker to Congress: If You Don’t Enact My Rule, My Soul Will Haunt You

ABC News’ Matthew Jaffe reports: White House economic adviser Paul Volcker today defended the administration’s proposal to curtail risky activities by the nation’s largest commercial banks. “The Volcker Rule”, unveiled last month by President Obama, would prohibit big commercial banks – whose deposits are insured by the FDIC – from engaging in so-called “proprietary trading”. “What I want to get out of the system is taxpayer support for speculative activity,” Volcker told the Senate Banking Committee. “I don’t want my taxpayer money going to support somebody’s proprietary trading.” Volcker said the proposal would cut down on “too big to fail” financial institutions, as would a form of “resolution authority” for regulators to wind down large failing firms. Should lawmakers fail to enact such financial regulatory reforms, Volcker warned, another crisis will eventually ensue. “I tell you as sure as I’m sitting here today that if banking institutions are protected by the taxpayer and they are free to speculate, I may not live long enough to see the crisis, but my soul is going to come back to haunt you,” the former Federal Reserve chairman cautioned. That view was supported by the panel’s chairman, Sen. Chris Dodd, D-Conn., who is leading the committee’s consideration of possible reform measures. “All of us – regardless of what your political party is or affiliation – we cannot allow this to happen again,” Dodd told his colleagues. But the panel’s ranking Republican Richard Shelby was more hesitant to back Volcker’s plan, voicing displeasure with the late timing of Obama’s announcement. “This concept that we have before us today was air-dropped into the debate,” said Shelby, noting that the House had already passed its reform bill.  Joining Volcker at the witness table today was Deputy Treasury Secretary Neal Wolin, who refuted suggestions that his boss Tim Geithner disagreed with Volcker’s proposal. President Obama’s decision to pursue the plan, Wolin said, was based on “consensus recommendation from all the economic team.” -Matthew Jaffe