More than five years after the start of the financial crisis and three years after the passage of the financial reform law that contained it, the Volcker Rule remains unfinished business.
That rule would prohibit banks from making bets in financial markets on their own behalf and would also limit their investments in hedge funds, and it could finally be on its way, says Treasury Secretary Jack Lew.
"I'm optimistic that we are going to see a rule by the end of the year," Lew said, speaking at a Tuesday event hosted by the Wall Street Journal.
Lew's comments add to recent reports that the White House is increasing pressure on regulators to finalize the long-awaited financial regulatory rule. Lew and President Obama have both reportedly recently been pressuring regulators to finish drafting the rule by the end of the year, according to The New York Times.
The Volcker Rule, named for former Federal Reserve Chairman Paul Volcker, is a provision of the 2010 Dodd-Frank financial reform law. Since the law's passage, regulatory agencies have been working to finalize the specifics of the new regulation. Currently, five agencies are involved in writing the final rule, according to the New York Times.
Since the law was enacted, banks and some business trade groups have been lobbying against the restrictions, saying proprietary trading – the kind of trading the Volcker Rule would prohibit -- did not cause the financial crisis.
However, Lew believes that the tenor of the anti-Volcker-Rule sentiment has shifted over the years. He says a desire for certainty in regulation has changed that tone.
"I think that if you look at the period of time from Dodd-Frank being enacted to now, there were a couple of years where every effort to delay implementation of Dodd-Frank was used," he said. "For the last year we've seen a different environment, an environment where the need for certainty and acceptance that Dodd-Frank is the law of the land seems to have replaced that effort to delay and perhaps repeal it."
Though the rule may be completed this year, banks may have quite some time before they are required to follow it. As the Financial Times reported this week, banks are not currently required to follow the Volcker Rule until July 2014, and the Federal Reserve is considering pushing that date to July 2015 to give banks more time to comply with the rule.
In his remarks, Lew also addressed one other major area of uncertainty: congressional fights over the debt limit. Lew said he believed Republican congressional leaders were bruised from the recent shutdown and debt limit fight but did not give firm answers on what he believes will happen.
"I think that if you look at the things Republican leaders have said since October, it's clear it was not a good experience either for the country or for them politically," Lew said. He added that while he believes it is the "right thing" for Congress to approve a debt-limit increase, the Treasury will have roughly one month of borrowing ability beyond the current Feb. 7 deadline, thanks to "extraordinary measures" – accounting tactics the Treasury can deploy to ensure the government continues to pay its bills on time, even after the nation has technically hit the debt limit.