Take the Volcker Rule, which proscribes banks that accept insured deposits from engaging in the riskiest kinds of trading. This makes sense in theory but the rule's execution will depend on how regulators define and enforce it. It's hardly reassuring when the Davis Polk & Wardwell law firm has to write a seven-page memo, as it did on Friday, explaining how this rule-making will proceed. The Volcker Rule may work in restraining excessive risk-taking. Or it may merely drive that risk-taking into other institutions that will attract the best and brightest drawn to the higher profits such trading can gain.
The Journal on the Volcker Rule