Pressure Builds to Finish Volcker Rule on Wall St. Oversight

The Obama administration, currently stumbling through the health care overhaul, has reached a critical stage in its other signature effort: reining in Wall Street.

The push to reshape financial oversight hinges on negotiations in the coming weeks over the so-called Volcker Rule, a regulation that strikes at the heart of Wall Street risk-taking. The rule, which bans banks from trading for their own gain, has become synonymous with the Dodd-Frank overhaul law that Congress adopted after the financial crisis.

Treasury Secretary Jacob J. Lew has strongly urged federal agencies to finish writing the Volcker Rule by the end of the year — more than a year after they had been expected to do so — and President Obama recently stressed the importance of the deadline.

While regulators are optimistic they will complete the rule soon, even after facing a lobbying onslaught from Wall Street, they have little time to overcome the internal wrangling that has stymied them for years.

The tension among regulators — five agencies are writing the rule — has centered on just how stringent to make it.

Some regulators are pushing to close potential loopholes, saying the rule will prevent future trading blowups at big banks, a concern that gained traction when JPMorgan Chase sustained a $6 billion trading loss in London. Yet some officials at other agencies, including the Federal Reserve and the Securities and Exchange Commission, have at times worried that the rule might inhibit banks from activities that are considered important for their health and the functioning of markets.

The tenor of the negotiations underscores how the Volcker Rule has emerged as a litmus test of the strength of Dodd-Frank, especially after regulators weakened other rules under that 2010 law. And although the Volcker Rule is only one of 400 regulations to arise from the sweeping overhaul, its symbolic significance has captivated Washington and Wall Street alike.

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