"Volcker rule" at issue as reform bill nears finale

Paul Volcker, chairman of the newly formed Economic Recovery Advisory Board, attends a speech by U.S. President Barack Obama about Wall Street reforms at Cooper Union in New York April 22, 2010.
Credit: Reuters/Natalie Behring

Paul Volcker, chairman of the newly formed Economic Recovery Advisory Board, attends a speech by U.S. President Barack Obama about Wall Street reforms at Cooper Union in New York April 22, 2010.

Credit: Reuters/Natalie Behring

 
WASHINGTON (Reuters) - As Congress got to work crafting a final Wall Street reform bill on Tuesday, new tensions surfaced over the proposed "Volcker rule" that aims to curb risky trading and investing by banks.

White House economic adviser Paul Volcker, in a letter obtained by Reuters, said he firmly opposes exemptions to his rule being sought by banks that say they make only small investments in private equity and hedge funds.

At the same time, some Senate Democrats were moving to toughen the Volcker rule by reducing the latitude given to regulators in implementing it once it becomes law -- a prospect now widely seen as all but certain, likely within weeks.

Conflict over the rule -- which threatens the profits of banking giants such as Goldman Sachs and Morgan Stanley -- came as a congressional conference committee prepared for its first meeting on merging House and Senate reform measures into the biggest bank regulation overhaul since the 1930s.

After days of behind-the-scenes talks among conferees, the committee will hold its first public meeting on Thursday, with the goal of completing its work by June 26, Representative Barney Frank, the committee chairman, said on Tuesday.

House of Representatives Speaker Nancy Pelosi will appoint Democratic members from that chamber to the joint Senate-House committee on Wednesday, Frank told reporters.

Frank and other conference committee leaders will have the difficult job of balancing Democrats' desire for a hard-hitting bill with the need to retain some support from Republicans who have generally sided with Wall Street in resisting changes.

The completed House-Senate package must win passage in each chamber before it can be sent to Obama to be signed.

FRANK, DODD VOW OPEN PROCESS

Frank said conferees will aim to work for six to eight days between Thursday and June 26. He and his Senate counterpart, Democrat Christopher Dodd, said they would make committee sessions as open as possible.

Using the Senate-passed legislation as a starting point, conference members will have to propose changes a day before they are voted on, in an effort to avoid the secret deal-making that has marked past conference committees, Frank said.

"We certainly have no reason to try to keep the public out," Frank said. "We've benefited from its presence, he added," noting that public attention so far has had the effect of making the legislation tougher on Wall Street.

Dodd said the Senate conferees, who have already been appointed, will hold an initial meeting on Wednesday.

The Volcker rule was first proposed in January by Volcker and President Barack Obama, stunning capital markets.

It would curb proprietary trading by banks for their own accounts unrelated to customers' needs; bar them from sponsoring hedge funds and private equity funds; and limit their future growth through a new cap on market share.

The Senate bill, approved last month, endorsed the rule, but subjected it to a two-year study by regulators that critics said left the door open to watering it down later.

The Volcker rule is not in the House bill, but the bill has language that would let regulators bar proprietary trading at institutions that threaten financial stability.

Senate aides said large banks are pressing for "de minimis" exemptions to the Volcker rule that would let them invest in outside funds for marketing or relationship purposes.

VOLCKER "ABSOLUTELY" OPPOSES EXEMPTIONS

"I absolutely oppose any such modification" of the Senate bill, Volcker said in his May 17 letter sent to Dodd.
"Allowing a bank to invest in a speculative fund goes against the very intent of the (Senate) bill as we seek to define those activities that are worthy of government protection," he said in the letter.

The fight over the Volcker rule was unfolding in tandem with efforts by banks to kill another proposed measure that would force them to spin off their swap-trading desks.

Swaps are derivative contracts that allow wagering on the direction of interest rates or the likelihood of a borrower defaulting on its debt, known as a credit default swap.

Credit default swaps were blamed in the 2007-2009 financial crisis that hammered economies worldwide, triggering taxpayer bailouts and a global wave of financial reform initiatives.

The swap-desk measure from Democratic Senator Blanche Lincoln could be dropped if the Volcker rule is toughened, some sources said, but the interplay between the two was unclear.

"We should correct the derivatives language independent of the Volcker rule and then try to get the Volcker rule right, which is also a complex issue. I don't think the two should be linked," Republican Senator Judd Gregg told Reuters Insider.

A key factor will be the outcome of Lincoln's difficult primary election race back home in Arkansas on Tuesday.

Analysts have said for weeks that her swap desk "push-out" measure would likely be dropped, something that would be even more likely if she loses in the primary.

MERKLEY: TOUGHEN VOLCKER RULE

Senator Jeff Merkley told Reuters on Tuesday that the Volcker rule is crucial to reform and should be toughened.

He and Senator Carl Levin, both Democrats, want to give regulators less discretion in implementing it. Merkley said he and Levin would meet on Tuesday with Volcker "to discuss the conference committee and how we're going to get this done."

Volcker, in a May 19 letter to Merkley and Levin, expressed support for their proposal, saying it would "clarify and enhance the proprietary trading restrictions" in the bill.

Levin told reporters on Tuesday that he was not linking the measure he and Merkley support to the Lincoln provision. "We're not arguing that it's one or the other," Levin said.

Banking industry analysts estimated last month that the sweeping financial reforms then being debated in Congress, taken together, could reduce big banks' profits in a range of 12 to 35 percent, depending on the institution.

Other banks whose profits could be hit by the Volcker rule, include Citigroup, JPMorgan Chase and Bank of America.

On another front, Dodd said discussions were under way about a possible transition period that would help banks comply with new capital standards being proposed in the Senate bill under an amendment by Republican Senator Susan Collins.

"I don't know if it's been resolved yet. We're working very closely with Senator Collins," Dodd said.
Both the House and Senate bills call for higher capital requirements on banks and financial firms as they get bigger and assume more risk. Neither bill has much detail, however, largely leaving that up to regulators -- with one difference.

The Collins amendment would make bank holding companies adhere to the same capital standards as bank subsidiaries. It would also bar bank holding companies from counting certain hybrid securities in meeting a key measure of strength.

(Additional reporting by Caren Bohan, Rachelle Younglai, Thomas Ferraro and Charles Abbott; Editing by Leslie Adler)

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Another Exercise Benefit: You Won’t Fall as Much

Newswise — Remaining physically fit and sticking to a regular exercise routine could lower your risk of taking a tumble, finds a new research study.

About 19,000 people die each year in the United States from falls and about 8 million undergo treatment in emergency rooms. What’s more, although falls are the leading cause of injuries among people age 65 and older, young people fall down just as much as seniors, according to the study.

“We were not surprised that people 65 years and older were no more likely to report falling than younger people, given that younger people are more likely to engage in more risky activities, such as standing on ladders, running and playing sports,” said lead author Kristin Mertz, M.D., at the epidemiology department at the University of Pittsburgh.

Mertz and her colleagues wanted to learn what people are doing when they fall and whether fitness has a part in the likelihood of falling. Their findings appear online and in the July issue of the American Journal of Preventive Medicine.

The researchers used data from participants in the Aerobics Center Longitudinal Study from 1970 to 1989 and who responded to questions about falls during a follow-up survey in 1990.

The survey asked whether the participants had fallen in the past 12 months and, if so, what they were doing when they fell. Were they, for instance, walking, doing sports, exercising or getting out a tub? Participants answered questions about how many minutes each week they did aerobic exercise and they took a treadmill test as a measure of fitness.

Of the 10,615 participants between the ages of 20 and 87 years, 2,110 (or 20 percent) reported falling in the last year. Of those who fell, 15 percent fell while walking. Women were 2.8 times as likely as men to fall while walking, but fitness levels made a difference in men falling while it did not for women. The study found men with low fitness levels were 2.2 times more apt to fall while walking than were highly fit men.


“We were surprised to find that fitness and physical activity seem to have a stronger relationship with walking-related falls in men compared with women,” Mertz said.
The researchers concluded that individuals need about two hours of regular exercise a week to lower the risk of falling. Those who exercised less − or not at all − did not have the same protection.

Debbie Rose, co-director at the Fall Prevention Center of Excellence at California State University at Fullerton, agreed.

“Of all the fall prevention strategies that have been studied over the last two decades, well-designed exercise programs produce the best results, both in terms of lowering fall risk and fall incidence rates,” she said. “Physical activities designed to improve aerobic endurance should be included in any activity program aimed at reducing fall risk.”

Source: Health Behavior News Service, 

 American Journal of Preventive Medicine: Contact the editorial office at (858) 534-9340 or eAJPM@ucsd.edu.
Mertz KJ, et al. Falls among adults: the association of cardiorespiratory fitness and physical activity with walking-related falls. Am J Prev Med 39(1), 2010.
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Is the Internet ruining our minds?

Books vs Internet 

Author Carr, shields our brains from distractions: books allows us to focus our mind on one topic at a time, unlike reading on Internet where we skim, browse and quickly scan through torrents of text, photos and video.

"Contemplation, introspection, reflection -- there is no space or time for those on the Internet."

 

We have developed sharper skills at making fast decisions, particularly visual ones, Carr says. Photograph by: Photos.com, canada.com

When author Nicholas Carr began researching his book on whether the Internet is ruining our minds, he restricted his online access and e-mail and turned off his Twitter and Facebook accounts.

His new book "The Shallows: What the Internet is Doing to Our Brains" argues the latest technology renders us less capable of deep thinking. Carr found himself so distracted that he couldn't work on the book while staying as connected, as is commonplace.

"I found my inability to concentrate a great disability," Carr told Reuters in an interview.

"So, I abandoned my Facebook and Twitter accounts and throttled back on e-mail so I was only checking a couple of times a day rather than every 45 seconds. I found those types of things really did make a difference," he said.

After initially feeling "befuddled" by his sudden lack of online connection, Carr said, within a couple of weeks he was able to stay focused on one task for a sustained period and, thankfully, able to do his work.

Carr wrote a 2008 Atlantic magazine piece that posed the controversial question "Is Google Making Us Stupid?" and wanted to dig deeper into how the Internet alters our minds.

His book examines the history of reading and the science of how using different media changes our brains. Exploring how society shifted from an oral tradition to the printed word and to the Internet, he details how the brain rewires itself to adjust to new information sources.

Reading on the Internet has fundamentally changed how we use our brains, he writes.

Facing a torrent of text, photos, video, music and links to other web pages combined with incessant interruptions from text messages, e-mails, Facebook updates, Tweets, blogs and RSS feeds, our minds have become used to skimming, browsing and scanning information.

As a result, we have developed sharper skills at making fast decisions, particularly visual ones, Carr says.

But now most of us infrequently read books, long essays or articles that would help us focus, concentrate and be introspective and contemplative, Carr writes.

ARE WE LIBRARIANS?

He says we are becoming more like librarians -- able to find information quickly and discern the best nuggets -- than scholars who digest and interpret information.

That lack of focus hinders our long-term memory, leading many of us to feel distracted, he said.
"We never engage the deeper, interpretive functions of our brains," he said.

To illustrate, he likens short-term memory to a thimble and long-term memory to a large bathtub. Reading a book is like filling the tub with water from one steadily flowing faucet with each thimble of information building upon the last.

By contrast, the Internet is countless fast-flowing faucets, leaving us grasping for thimbles of disparate information to put in the tub and making it harder for our brains to draw connections and have cogent recall.
"What we are losing is a whole other set of mental skills, the ones that require not the shifting of our focus but the maintaining of our focus," Carr said.

"Contemplation, introspection, reflection -- there is no space or time for those on the Internet."

Carr says for centuries books shielded our brains from distraction, focusing our minds on one topic at a time.
But with devices such as Amazon's Kindle and Apple's iPad, which incorporate eReaders and web browsers, becoming commonplace, Carr predicts books too will change.

"New forms of reading always require new forms of writing," he said.

If writers cater to a society that is chronically distracted, they will inevitably eschew writing complex arguments that require sustained attention and instead write in pithy, bite-sized bits of information, Carr predicts.

Carr has a suggestion for those who feel web surfing has left them incapable of concentration -- slow down, turn off the Internet and practice the skills of contemplation, introspection and reflection.

"It is pretty clear from the brain science that if you don't exercise particular cognitive skills, you are going to lose them," he said. "If you are constantly distracted, you are not going to think in the same way that you would think if you paid attention."

By Mark Egan, Reuters