Did Bank Rules Kill Liquidity? Volcker, Frank Respond
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Last week’s market gyrations sparked questions about whether bank regulations implemented after the 2008 financial crisis exacerbated price declines by limiting the ability of Wall Street banks to make markets.
As stocks and some corporate bonds fell last week, some hedge-fund managers said higher capital requirements had curbed Wall Street trading desks’ ability to cushion the declines by stepping in to buy securities -- what is known as providing liquidity. Also blamed: the Dodd-Frank Act’s Volcker Rule that limits federally insured banks from speculating on some assets, including corporate debt.