by Hester Peirce, Robert Greene
January 17, 2013
The Volcker Rule, although rooted in legitimate concerns about taxpayer-funded risk-taking, relies on clumsy regulatory constraints on bank activities and unworkable regulatory monitoring to address those concerns. Its goals could be achieved by strong measures designed both to limit the risk that taxpayers bear and to force shareholders and creditors to take responsibility for the risks undertaken by banking entities. Options include a lower cap on federal deposit insurance, a reconfiguration of deposit insurance, increased public transparency about banks, and greater shareholder and creditor exposure to the downside of bank risk-taking.