Financial Reform

Volcker: ‘We Could Have Done Better’

Key economist disappointed with final bill.

Former Federal Reserve Chairman Paul Volcker was maybe the key adviser to President Obama on financial reform; so how does he grade the final product? “We could have done better,” Volcker tells The New Yorker. He seems most disappointed—no surprise here—by the watering down of the “Volcker Rule,” which would have banned banks from speculating in the markets (known as proprietary trading) and investing in hedge funds and private-equity firms. At the last minute, industry lobbyists convinced the bill’s main sponsors, Rep. Barney Frank and Senator Chris Dodd, to drop a dollar-limit on hedge fund investments by banks and other restrictions that would have prevented banks from investing more money in risky investments. “The ban on proprietary trading is still there,” Volcker says said. “But I’m sorry we lost the tighter limitations on hedge funds and private equity. I’m a little pained that it doesn’t have the purity I was searching for.”