Synopsis: On March 3, 2010, prior to Senator Dodd's introduction of the latest version of his Senate financial reform proposal described above, the Obama Administration formally issued a proposal, known as the "Volcker Rule," which had initially been raised in January 2010 and would place strict limits on the ability of banks to trade on their own accounts and to invest in hedge funds and private equity funds. The restrictions on trading and investment are similar to those proposed in Senator Dodd's bill (described above). However, in addition to these restrictions, the Volcker Rule would contain a market share restriction that would prevent banks from acquiring more than 10% of the liabilities of the banking system as a whole. Regulators would have the authority to block mergers and other transactions that would result in a particular financial institution acquiring more liabilities than permitted, and would have discretion to make exceptions for banks seeking to acquire institutions in danger of default and for banks already over the 10% threshold seeking to make small acquisitions. The text of the Bank Holding Company Act, as it would be amended under the proposed Volcker Rule, can be found here.
On March 10, 2010, Senators Jeff Merkeley (D-Ore.) and Carl Levin (D-Mich.) introduced the "Protect Our Recovery Through Oversight of Proprietary Trading Act of 2010," or the "PROP Trading Act," which also seeks to restrict bank proprietary trading and hedge fund and private equity fund investments. While substantially similar to the Dodd proposal and the Volcker Rule, the PROP Trading Act would impose even further restrictions on trades that are not explicitly banned, but that could result in a conflict of interest between banks and their clients or pose a threat, in the opinion of regulators, either to the bank in question or the financial stability of the United States. The text of the bill can be found here.
Status: Because of the similarities and overlap among the Dodd financial reform proposal and the proposed Volcker Rule and PROP Trading Act, it is likely that the Obama Administration will wait to see the extent to which the final comprehensive financial reform bill encompasses the Volcker Rule and PROP Trading Act proposals before pushing further for their independent passage.