Actor Louis Gossett Jr. dies at 87. He was the first Black man to win the best supporting actor Oscar, for 'An Officer and a Gentleman.'
What happens next Where's my refund? Best CD rates this month Shop and save 🤑
BUSINESS
Federal Reserve System

Banks win more time to sell private equity stakes

Kevin McCoy
USA TODAY
Paul Volcker in 2013.

The Federal Reserve Thursday gave banks a two-year extension of the July 2015 deadline for divesting their multi-billion-dollar stakes in private equity investments and hedge funds.

In a victory for the financial industry, the Fed approved the new timetable for the so-called Volcker Rule, a key safety provision of the Dodd-Frank Wall Street Reform and Consumer Act enacted after the 2008 financial crisis.

The rule bars most such investments as part of a ban on proprietary trading by banks — transactions that could undermine the fiscal strength of some institutions and affect the broader economy if the trades turned out to be losing bets.

Banks have contended they needed more time to unwind the complex and often illiquid investments. The added time, to be granted in two, one-year extensions, will enable banks to sell the investments "in an orderly manner," according to the Fed's order.

The change will "reduce the potential disruptive effects that significant divestitures of covered funds could have on markets," the order stated.

Named after former Fed chairman Paul Volcker, who recommended it, the rule was designed to rein in risky trades banks have done for their own accounts and push the institutions to refocus more on traditional lending or trading on behalf of customers.

While continuing to lobby for broader changes in the rule and other Dodd-Frank provisions, the financial industry has pressed for interim extensions of the regulatory deadlines. In October, the Securities Industry and Financial Markets Association sent a letter to the Fed seeking a delay "so that banking entities in all cases have sufficient time to make any changes to their business that ultimately may be necessary."

Bank lobbyists have sought deadline extensions as long as seven years, The Wall Street Journal reported in August.

Americans for Financial Reform, a non-profit coalition of consumer, labor and other groups, called the Fed action disappointing and said it "raises serious questions about regulators' intentions to properly enforce the Volcker Rule."

"Since proprietary trading can occur through the mechanism of external funds, the delay in divestment requirements for covered funds will greatly weaken the enforcement of other crucial parts of the Volcker Rule as well," the organization said.

Featured Weekly Ad