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Thursday, Jul. 30, 2020

Do recent changes to the Volcker Rule allow banks to make riskier investments?

Samuel Henning, Gigafact
yes

Federal regulators recently eased restrictions imposed on banks by the Volcker rule, named after the late Federal Reserve chair known for reining in inflation in the early 1980s. Volcker proposed the rule after the 2008 financial crisis as a way to strengthen the banking system.

The changes, among other measures, allow banks to more easily make large venture capital investments and to reserve less cash against certain types of derivatives trades. These potentially risky short-term investments were banned when the rule came into effect in 2014. The only Federal Deposit Insurance Corp. director opposed to the latest changes warned they would remove any "meaningful constraint" on speculative trading by banks covered by FDIC deposit insurance as part of the "federal safety net."

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