Harmful Reach of Volcker Rule Extends Far Beyond Wall StreetPosted by on March 01, 2012
An electric utility in Texas.
A housing authority in Connecticut.
A water treatment project on the banks of the Potomac River.
What do all three have in common?
They all could be harmed by the Volcker Rule.
While the Volcker Rule is touted as a central part of Washington’s effort to get “tough” on Wall Street, it’s become the latest example of how the Dodd-Frank Act and its 400+ regulations have spawned a multitude of unintended consequences.
What kind of unintended consequences?
“State and local officials say the new regulation, known as the Volcker Rule, could make it more expensive for them to raise money from investors to pay, for instance, for environmental cleanup and housing assistance,” reports the Washington Post.
And when state and local governments say the Volcker Rule could make it more expensive “for them” to raise money, what they mean is it will be more expensive for the taxpayers.
How does a measure promoted as “Wall Street reform” end up making it harder for cities and states to afford thing like environmental cleanup projects?
The complex Volcker Rule “creates these bifurcations now in the municipal markets where you’re going to have authorities, enterprise funds, and water utilities paying more to issue their bonds simply because of how they’re structured,” says Timothy L. Firestine, the vice chairman of the D.C. Water and Sewer Authority.
It’s not only governments here in the United States that have come out against the Volcker Rule. Foreign government have “unleashed a torrent of criticism” against it on the grounds it could make Europe’s debt problems even worse.
“European governments warn that the regulation could further aggravate their debt crisis, which is already roiling global financial markets.”
This is the same European debt crisis that poses a threat to America’s economic recovery, Federal Reserve Chairman Ben Bernanke recently told Congress.