Did JPMorgan Outsmart the Rest of Wall Street on the Volcker Rule?

The news that that Spencer Bachus has sent a note to Treasury Secretary Tim Geithner and other top regulators warning that the "Volcker Rule" could damage US competitiveness must have Jamie Dimon smiling.

Jamie Dimon
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Jamie Dimon

The bank Dimon runs, JPMorgan Chase , has been perhaps the most aggressive firm on Wall Street when it comes to resisting allowing the Volcker Rule to reshape its business. While Wall Street firms like Morgan Stanley and Goldman Sachs have shed hedge funds and trading desks, JP Morgan Chase has not only kept its biggest hedge fund—it actually acquired a new hedge fund recently.

Bachus, the front-runner to head the House of Representatives' Financial Services Committee, offered several amendments last summer that aimed at paring back the Volcker Rule. Now he has sent a letter warning that if "the Volcker Rule's prohibitions are expansively interpreted and rigidly implemented against U.S. institutions while other nations refuse to adopt them, the damage to U.S. competitiveness and job creation could be substantial."

The Volcker Rule, which is named for the Obama adviser who originally proposed it, places limits proprietary trading by banks and limits the investments of banks in hedge funds and private equity funds. Congress left many of the details of the Volcker Rule to be filled-in by regulators.

If Bachus is able to sway regulators, he may be able to limit the impact of the Volcker Rule without the need to pass new legislation.

JPMorgan Chase may have made a very good bet when it decided not to shed assets in anticipation of the Volcker Rule. It could wind up being a much less important part of the financial reforms than it once seemed.


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