Five federal regulators agreed on Tuesday on a final version of the Volcker Rule, which aims to prohibit regulated banks from using customer money to trade for their own gain. Now, the rule’s biggest test may be just around the corner, DealBook’s Peter Eavis writes.
Getting to this point was already an important effort in the authorities’ quest to overhaul the financial system. The Volcker Rule was particularly taxing to write, having to distinguish trading that banks are allowed to do â€" to serve their customers and offset their own risks â€" from the prohibited trading done solely for their own profit, Mr. Eavis writes. Regulators also had to contend with a spirited lobbying effort by the banks. In the end, Paul A. Volcker, a former Federal Reserve chairman for whom the rule is named, sounded somewhat satisfied with the finished product.
But a new challenge is beginning. “The rule has plenty of potential gray areas that banks may be able to exploit. As a result, regulators will have to remain extremely vigilant, and understand highly complex trading books, if they are to properly enforce the rule,†Mr. Eavis writes. Janet L. Yellen, who is poised to become the chairwoman of the Federal Reserve, recognized this challenge. “Supervisors are going to bear a very important responsibility to make sure the rule really works as intended,†she said on Tuesday at the Fed board meeting to approve the rule
The rule released on Tuesday came after behind-the-scenes pressure from the White House to finish a piece of regulation that had been mired in delays, Ben Protess and Mr. Eavis report in DealBook. Treasury Secretary Jacob J. Lew declared that the rule was too important to delay and that he wanted the deal done by the end of 2013, people briefed on the meeting recalled in recent interviews. President Obama, striking a similarly urgent tone, emphasized that “it’s really important to make the deadline,†the people said.
An account of the negotiations that led to the votes, based on interviews with the people briefed on the matter who were not authorized to speak publicly, “illuminates the hands-on approach that Mr. Lew â€" in contrast to the more low-key method of his predecessor, Timothy F. Geithner â€" adopted in the talks, as well as the behind-the-scenes role that Mr. Volcker and the president played,†Mr. Protess and Mr. Eavis write. “In addition to meeting with Mr. Lew, the 86-year-old Mr. Volcker met with President Obama in the Oval Office last week, the people said, one of four times they met to discuss the rule.â€
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“The law firm Boies, Schiller & Flexner is poised to pay out year-end bonuses of as much as $300,000 to some of its associates, with the average young lawyer taking home an additional $85,000, a firm spokeswoman confirmed. Last year, the top bonus handed out to some of the young lawyers at the firm, which specializes in trial and appellate litigation, was $250,000.â€
ON THE AGENDA  | Men’s Wearhouse reports earnings after the market closes. The Senate Banking Committee holds a hearing at 3:30 p.m. on American manufacturing.
CAPITOL LEADERS REACH A BUDGET DEAL  | “House and Senate budget negotiators reached agreement Tuesday on a budget deal that would raise military and domestic spending over the next two years, shifting the pain of across-the-board cuts to other programs over the coming decade and raising fees on airline tickets to pay for airport security,†Jonathan Weisman reports in The New York Times. “The deal, while modest in scope, amounts to a cease-fire in the budget wars that have debilitated Washington since 2011 and gives lawmakers breathing room to try to address the real drivers of federal spending â€" health care and entitlement programs like Medicare and Social Security â€" and to reshape the tax code.â€
Vice Media Buys a Tech Company  | The New York Times reports: “Advertising, journalism and technology continue to converge. The latest example: Vice Media’s acquisition of Carrot Creative, a digital agency that creates apps, websites and games for media companies and brands.†NEW YORK TIMES
Scripps Buys a Digital Video News Start-Up  | The E.W. Scripps Company said it had acquired Newsy, a five-year-old video start-up based in Columbia, Mo. SCRIPPS
Discovery Is Said to Consider a Bid for Scripps Networks  | Variety reports: “Discovery Communications is mulling a bid for Scripps Networks Interactive, parent company of Food Network, HGTV, Travel Channel and other lifestyle-oriented cablers.†VARIETY
Shake-Up at Lululemon  | Two days before it was to report its third-quarter earnings, Lululemon Athletica announced on Tuesday that Dennis J. Wilson, the founder, would step down from his position as chairman of the board of directors, although he remains on the board. NEW YORK TIMES
How Time Warner Could Benefit by Turning the Tables  | Rumors have suggested that Time Warner Cable could be acquired by a smaller rival like Charter Communications. Jeffrey Goldfarb of Reuters Breakingviews examines how the cable company would fare in a so-called Pac-Man defense. REUTERS BREAKINGVIEWS
JPMorgan Files Patent for Online Payment System  | The Financial Times reports: “JPMorgan Chase has filed a U.S. patent application for a computerized payment system that resembles some aspects of Bitcoin, the controversial virtual currency.†FINANCIAL TIMES
Santander to Buy Stake in Bank of Shanghai for $647 Million  | Banco Santander, the Spanish lender, has agreed to buy an 8 percent stake, held by HSBC, in Bank of Shanghai to increase Santander’s presence in Asia. DealBook »
Finance Chief of R.B.S. Resigns After 3 Months in Post  | The Royal Bank of Scotland said on Tuesday that Nathan Bostock had resigned as chief financial officer to join Banco Santander’s British unit as deputy chief executive and chief risk officer. DealBook »
Bain Capital Offers to Buy Macromill of Japan  | The private equity firm Bain Capital offered to buy Macromill, a Japanese market research firm, for about $501 million. The biggest shareholder of Macromill is Yahoo Japan, Bloomberg News writes. BLOOMBERG NEWS
Blackstone Expects More Real Estate Deals in Asia  | “As the competition has receded, the investment landscape has become more interesting,†Chris Heady, the Blackstone Group’s regional head of real estate investing in Hong Kong, told Bloomberg News. BLOOMBERG NEWS
Twitter Shares Surge Again  | Shares of Twitter rose to a new intraday high on Tuesday, a day after the stock logged its biggest one-day gain ever, Reuters reports. REUTERS
Rethinking Online Courses  | The New York Times reports: “Two years after a Stanford professor drew 160,000 students from around the globe to a free online course on artificial intelligence, starting what was widely viewed as a revolution in higher education, early results for such large-scale courses are disappointing, forcing a rethinking of how college instruction can best use the Internet.†NEW YORK TIMES
Palantir Increases Size of Financing Round  | After previously saying it would raise $57 million in a financing round, Palantir Technologies filed on Tuesday to increase the amount of money being raised to $107.5 million, TechCrunch reports. TECHCRUNCH
New G.M. Chief Is Company Woman  | On Tuesday, Mary T. Barra “completed a remarkable personal odyssey when she was named as the next chief executive of G.M. â€" and the first woman to ascend to the top job at a major auto company,†The New York Times reports. NEW YORK TIMES
Good Governance at G.M.  | The automaker’s new chief executive, Mary Barra, is an engineer by training who has a reputation for both good design and keeping a firm handle on costs, writes Antony Currie of Reuters Breakingviews. REUTERS BREAKINGVIEWS
British Regulator Fines Lloyds Banking $46 Million Over Sales Program  | Britain’s Financial Conduct Authority says that systems at the bank were “inadequate†and “seriously flawed†to manage its incentive program, which rewarded financial advisers for reaching sales goals. DealBook »
A Dive Into the Volcker Rule’s Details  | “You could do a lot worse than a rule that requires you to think about what you’re doing,†Matt Levine writes for Bloomberg View. BLOOMBERG VIEW
Walmart Names New Head of Foreign Operations  | The New York Times reports: “Two weeks after naming a new chief executive, Walmart announced on Tuesday that David Cheesewright, president of several overseas divisions, would soon take on all of the company’s international operations.†NEW YORK TIMES
Swiss Bank Becomes First to Participate in U.S. Tax Deal  | Valiant Bank, a small Swiss bank, became the first in the country to say that it would sign a deal with the United States aimed at ending a three-year tax evasion dispute with Switzerland. DealBook »
