But to the chagrin of Mr Levin and others who wanted an outright ban, it does contain some latitude for banks to invest in hedge funds and private equity firms.
Regulators also have a great deal of sway in interpreting the law, trying to define proprietary trading while allowing “market making” where banks buy and sell securities to facilitate customer trading.
“We recognise that reining in these practices will not be easy,” the senators write in a letter to the council, whose members include the Treasury and the Federal Reserve.
“Despite having just emerged as a nation from the worst financial crisis since the Great Depression, powerful interests will seek to weaken the?... protections,” the letter said.
“We in Congress resisted those efforts and provided you with a clear mandate and broad authority to act. The American people are now relying upon you to fully carry out the law.”
Tom Udall, the Democratic senator from New Mexico and a signatory, told the Financial Times that the “real purpose of the letter was to make sure there isn’t backsliding”.
“I worry very much that we aren’t going to do what needs to be done to prevent this from happening again,” he said.
“Congress voted for change and we need the regulators to move forward with change. They shouldn’t be giving away the ranch so we get back in this situation again,” he said.
Private equity firms and hedge funds are looking to hoover up employees and business lines from investment banks that are moving out of some trading activity.
Last week, nine of Goldman Sachs’ Principal Strategies proprietary traders moved to KKR, a private equity group that is building up its asset-management arm.
But the so-called “shadow banks” may also face a separate regulatory crackdown. The lawmakers urged the regulatory council to discourage proprietary trading at large interconnected “non-banks”.
“Capital charges and quantitative limits for systemically significant non-bank financial companies should be vigorous so as both to discourage and to reduce the risks and conflicts of interest from proprietary trading at these entities,” the senators wrote.