Key GOP rep warns of banking 'mass exodus'

spencer_bachus.gi.top.jpgRepublican Rep. Spencer Bachus, R-Ala, speaks during a news conference in September 2009. By Charles Riley, staff reporter


NEW YORK (CNNMoney.com) -- The congressman likely to supplant Rep. Barney Frank as chairman of the House Financial Services Committee is asking regulators to carefully consider the implications of a new rule designed to limit risky trading.

Rep. Spencer Bachus, a Republican from Alabama, warns in a letter sent to Treasury Secretary Tim Geithner and the Financial Stability Oversight Council that an overly-strict implementation of the Volcker Rule will spark a "mass exodus" of clients from U.S. banks to their competitors abroad.

The aim of the "Volcker Rule" is to stop big banks from making trades on their own accounts, especially since commercial banks have access to funds back-stopped by the government. The measure was included in the massive financial reform legislation signed into law by President Obama earlier this year.

In the letter, Bachus argues that if the language of the rule is rigidly implemented, U.S. banks will be at a disadvantage.

"If the Volcker Rule's prohibitions are expansively interpreted and rigidly implemented against U.S. institutions while other nations refuse to adopt them, the damage to U.S. competitiveness and job creation could be substantial," Bachus writes in the letter.

The Bachus letter was written in response to a request for comment from the Financial Stability Oversight Council, a regulatory body created by the Dodd-Frank Act that is charged with studying and adopting regulations to carry out the Volcker Rule.

On Thursday, the authors of the Volcker Rule, Democratic Sens. Carl Levin of Michigan and Jeff Merkley of Oregon, submitted their own letter to the council, arguing the measure remains necessary.

In particular, Merkley and Levin warn that banks will try to skirt the regulations by continuing proprietary trading through "market-making."

The pair also suggest the council should study ways to encourage foreign banks to adopt regulations similar to the Volcker Rule, a move that would level the playing field for U.S. banks. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,493.37 -69.93 -0.42%
Nasdaq 4,352.64 -17.13 -0.39%
S&P 500 1,925.15 -5.52 -0.29%
Treasuries 2.50 -0.05 -2.00%
Data as of 1:21am ET
Company Price Change % Change
Bank of America Corp... 14.98 -0.27 -1.77%
Apple Inc 96.13 0.53 0.55%
Facebook Inc 72.37 -0.28 -0.39%
General Electric Co 25.35 0.20 0.80%
Ford Motor Co 16.81 -0.21 -1.23%
Data as of Aug 1

Sections

P&G announces it is selling or closing about 90 smaller brands to focus on its 70 to 80 major brands. More

Terrell White has had a profit-sharing plan for his employees since 1981, believing that if the staff isn't happy, guests won't be either. More

Millennials are spending big money on coffee, alcohol and fast food. Here's where they're spending the most and how much, according to budgeting app Level Money. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.