The Obama administration's effort to crackdown on banks placing risky wagers with their own money has met Republican opposition.
Instead, he allowed JPMorgan to tweak its internal alarm system, allowing traders in the bank's chief investment office to continue placing risky bets.
The rule, Mr. Volcker and Democratic lawmakers say, will prevent banks from using their own capital to place risky bets while the government guarantees their deposits.
The rule, intended to restrict banks from placing risky trades and investing with hedge funds, has drawn an outcry from Republicans who want to mute its effect and some Democrats who want to strengthen it.
The Volcker Rule, a crucial component of the Dodd-Frank regulatory overhaul law, was rooted in his belief that banks should not place risky bets while enjoying government deposit insurance and other backing.
A New York state judge found JPMorgan Chase liable to the Russian-American billionaire Leonard Blavatnik for breach of contract for placing risky subprime mortgage securities in an investment account he held, and ordered the bank to pay more than $50 million in damages, including interest.
The trading blowup that followed has now become a flash point in the fierce debate over the Volcker Rule, which would ban banks from trading with their own money in an effort to prevent them from placing risky wagers while enjoying government backing.
NEW YORK TIMES JPMorgan Loses Suit Over Billionaire's Loss | A New York state judge found JPMorgan Chase liable to Leonard Blavatnik, a Russian-American billionaire, for breach of contract for placing risky mortgage securities in an investment account he held, ordering the bank to pay more than $50 million in damages, Reuters reports.
And European banks, notoriously conservative, have roundly rejected investments in startups that are bleeding red and placing risky bets on unproven technologies and business models.
It also, she says, underscored the need for "hard caps" on leverage, or borrowing by financial institutions to place risky bets, and it showed that regulators should act to head off asset bubbles before they get too large.
