Banks May Have to Unload Hedge Fund, PE Accounts After All

[TomCADem]

Source: Fox Business News

The nation’s big banks will have to spin off tens of billions of dollars in private equity and hedge fund assets as part of the financial overhaul bill now being debated in Congress, FOX Business has learned.

That’s because a less-publicized aspect of the so-called Volcker Rule - a plank of the regulatory reform scheme devised by presidential economic adviser Paul Volcker designed to prevent banks from engaging in risky “proprietary” trading - also scales back on other risky activities, such as having ownership positions in hedge funds and private equity funds.

Initially, the big banks believed the hedge fund and private equity aspect of the rule would have minimal impact on their bottom lines; banks believed it would only force them to unwind funds where firm money is in play, and they could still manage these accounts for clients. But now, as the financial-reform bill gets closer to becoming established law (it still needs to be reconciled by the House and the Senate and signed into law by President Obama) executives at the big banks aren’t so sure. They say the way the Volcker Rule is currently written may require them to sell off all their hedge funds and private equity accounts, even those where firm money doesn’t exist.

Even without the most far-reaching interpretation of the Volcker Rule, one analyst told FOX Business that “tens of billions of dollars” of private and equity and hedge fund assets will be sold in the coming years because of the new legislation. If interpreted broadly, that number will be multiplied several more times, this analyst said.


Read more: http://www.foxbusiness.com/story/markets/industries/finance/banks-unload-hedge-fund-pe-accounts/

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Interesting perspective from the corporate right regarding financial reform. I am sure the lobbyists will be working extra hard to try to strip out remnants of the Volcker Rule.

[sandnsea]

1. And does it really do that

or are they just saying it does so they can get support to strip that language out and end up with no unwinding required at all.

[bemildred]

2. Kinda makes your heart bleed, doesn't it?

:sarcasm:

[TomCADem]

3. The tone of that article is amazing. The poor little banks...

Then again, Neil Cavuto admitted that he was almost rooting for BP during the hearings today, so maybe their concern is heart felt.