Miller Says U.S. Should Issue Simplified Volcker Rule

The U.S. Treasury Department’s top official for domestic finance said regulators should seek “simplicity” in the so-called Volcker rule, which will restrict banks’ proprietary trading.

“We will strive for simplicity with Volcker and the other reforms we are implementing,” Mary Miller, the Treasury’s undersecretary for domestic finance, said at a conference today in Arlington, Virginia. “We understand its value. At the same time, we are mindful of the need to have smart rules that are responsive to the unique needs of our financial system and promote economic growth.”

The Volcker rule, named for its original proponent, former Federal Reserve Chairman Paul Volcker, is intended to reduce the chances that banks put depositors’ money at risk. The proposed rule was one of the most contested by the banking industry and resulted in more than 18,000 comment letters. Miller has said she thinks regulators would complete the final rule by the end of the year.

Speaking in conjunction with the anniversary of the September 2008 bankruptcy of Lehman Brothers Holdings Inc., Miller said the banking system is “far stronger than it was a few years ago” and more repair to market confidence and the economy is still needed.

‘Cannot Afford’

“We cannot afford another financial crisis,” Miller said at the American Banker Regulatory Symposium. “The price of reform is small compared to the price of another September 2008.”

She said regulators should develop “simple” and “sophisticated” rules as they implement the 2010 Dodd-Frank law in response to the financial crisis. She said the financial system needs “smart regulation that can make future financial shocks less likely and less damaging -- and without unnecessary compliance costs.”

On the planned overhaul of the nation’s housing finance system, Miller said the Obama administration would release ideas in the “reasonably near future” and the key is to find “strong bipartisan support.”

“We do need to get past the election but I think once we get past that I think there’s more support for some of the core tenets that have been discussed,” Miller said.

Treasury officials have been working on a plan for a housing finance overhaul since they released a white paper outlining a range of different options in 2011. Treasury Secretary Timothy F. Geithner said in February that he would release the plan by the beginning of this summer. That deadline passed without a release.

Fannie Mae and Freddie Mac have been operating under U.S. conservatorship since investments in risky loans pushed them to the brink of insolvency in 2008. The two companies have relied on almost $190 billion in taxpayer aid to stay afloat.

To contact the reporters on this story: Cheyenne Hopkins at Chopkins19@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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