It took five years. But it’s here. So, what does it do?
At its core, the rule bans banks from trading for their own gain. The practice, known as proprietary trading, is one of Wall Street’s most lucrative — and riskiest — activities.
Supporters of the Volcker Rule, the brainchild of Paul A. Volcker, a former Federal Reserve chairman and adviser to President Obama, said it would help prevent the buildup of the kinds of risky positions that nearly sank Wall Street in 2008. And they argued that, to help prevent future bailouts of Wall Street, large banks that enjoy forms of taxpayer backing should not use customers’ money to make bets on the direction of stocks and bonds.
In other words: The rule tries to prevent large banks from gambling with your deposits in ways that end up crashing the economy—leading to huge bank bailouts using your tax dollars. Makes sense. But there are loopholes.
