WASHINGTON (CNNMoney) -- The namesake of the so-called Volcker rule defended the policy in a letter to the Federal Reserve on Monday, and criticized banks for lobbying against it.
"With active cooperation among the agencies and with constructive consultation instead of futile stonewalling, an important reform can soon be put into place," said Paul Volcker, a former Fed chairman, in an essay accompanying his letter. Both documents were attained by CNNMoney.
Regulatory agencies set Monday as the deadline for comments about molding a working draft of the Volcker rule, which aims to ban risky trading by banks for their own profit, first proposed by Volcker two years ago.
Volcker said the rule is needed to limit future federal bailouts.
"The continuing explicit and implicit support by the Federal government of commercial banking organizations can be justified only to the extent those institutions provide essential financial services," Volcker wrote in the letter obtained by CNNMoney. "Proprietary trading of financial instruments. . .does not justify the taxpayer subsidy implicit in routine access to Federal Reserve credit, deposit insurance or emergency support."
By contrast, the U.S. Chamber of Commerce wrote a letter to the Fed on Monday asking it to go back to the drawing board and start over, saying the rule would put the American economy at a disadvantage.
"If these issues are not addressed by regulators, businesses will have a harder time raising capital, thereby restraining growth and job creation," wrote David Hirschmann, president of the Center for Capital Markets Competitiveness at the Chamber.
Republicans also want regulators to delay or stop the rule, saying it would stymie bank liquidity in the United States.
Regulators testified in a House hearing last month that preserving liquidity is on their minds, as well. They especially want banks to continue to have the power to make big, sometimes risky, short-term bets for customers looking to "make markets" or hedge risk.
In his letter to the Fed, Volcker also warned regulators to be careful in defining market-making. He said holding "substantial securities in a trading book for an extended period obviously assumes the character of a proprietary position, particularly if not specifically hedged," and that's what his rule is trying to prevent.
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