A fair bit of interesting press today on the Volcker rule, most landing pretty squarely where I did yesterday: it’s pretty tough, and better-than-expected given the staunch opposition, in terms of distinguishing legit customer-oriented trades versus proprietary ones, and it has some potentially useful language that should dampen traders’ incentives to take excessive risks to boost their pay. But it’s all about the enforcement.
Yet in all the articles I read–and I did not read every one–I didn’t see the (admittedly weird) name Austan Goolsbee, and I think I should have.
Back in the day when Austan and I were both on the President’s econ team (I was VP Biden’s chief economist), he worked very hard to ensure the Volcker rule (and Volcker himself) stayed in the policy mix. He wasn’t alone, and I’m not suggesting there was a big move to block the rule. If anything, the major concern was the feasibility of writing regs that could distinguish proprietary trades from “market making”–using bank capital to provide custom hedges for customers.
Anyway, Austan recognized that this distinction could be made, as did, of course, Volcker himself, and pressed to keep this part of Dodd/Frank financial reform in the mix.
Just a little reminder of a very important fact: policy outcomes depend inordinately on the people in the room. Sure, theory, evidence, and of course, ideology matter a lot. But personnel matters most.