CLE Materials for Panel #1 - George Washington University Law ...

WILMARTH
4/1/2011 1:11 PM
1030 OREGON LAW REVIEW [Vol. 89, 951
Rule’s ambiguous terms and numerous exemptions that rely on
regulatory interpretation, as well as its long phase-in period,
commentators have concluded that the rule probably will not have a
significant impact in restraining risk taking by major banks or in
preventing them from exploiting their safety net subsidies to fund
speculative activities. 339
c. The Lincoln Amendment
Section 726 of Dodd-Frank, the “Lincoln Amendment,” was
originally sponsored by Senator Blanche Lincoln (D-AR). 340 In April
2010, Senator Lincoln, as chair of the Senate Agriculture Committee,
included the Lincoln Amendment in derivatives reform legislation,
which was passed by the Agriculture Committee and subsequently
combined with the Senate Banking Committee’s regulatory reform
bill. As adopted by the Agriculture Committee, the Lincoln
Amendment would have barred dealers in swaps and other OTC
derivatives from receiving assistance from the DIF or from the Fed’s
discount window or other emergency lending facilities. 341
Senator Lincoln designed the provision to force major banks to
“spin off their derivatives operations” in order “to prevent a situation
in which a bank’s derivatives deals failed and forced taxpayers to bail
out the institution.” 342 The Lincoln Amendment was “also an effort
to crack down on the possibility that banks would use cheaper
Volcker’s personal assistant, that the financial services industry deployed “fifty-four
lobbying firms and three hundred million dollars . . . against us” during congressional
consideration of Dodd-Frank).
339 Id. (stating that “[w]ithout the legislative purity that Volcker was hoping for,
enforcing his rule will be difficult, and will rely on many of the same regulators who did
such a poor job the last time around”); Harper & Keoun, supra note 330, at 43 (quoting the
comment of William T. Winters, former co-chief executive officer of Chase’s investment
bank, that “I don’t think [the Volcker Rule] will have any impact at all on most banks”);
Johnson, supra note 309 (stating that the Volcker Rule was “negotiated down to almost
nothing”); Bradley Keoun & Dawn Kopecki, Bank of America, JPMorgan Lead Bank
Shares of Reform Deal, BLOOMBERG BUSINESSWEEK (June 25, 2010), http://www
.businessweek.com/news/2010-06-25/bank-of-america-jpmorgan-lead-bank-shares-onreform-deal.html
(quoting analyst Nancy Bush’s view that the final compromise on the
Volcker Rule meant that “the largest banks’ operations are largely left intact”).
340 Harper & Keoun, supra note 330, at 43; Johnson, supra note 309.
341 Richard Hill, Derivatives: Lincoln Derivatives Language Recommended by Ag
Panel: Merger with Dodd Bill Expected, 42 Sec. Reg. & L. Rep. (BNA) 810 (April 26,
2010).
342 Richard Hill, Derivatives: Conferees Reach Compromise: Banks Could Continue to
Trade Some Derivatives, 42 Sec. Reg. & L. Rep. (BNA) 1234 (June 28, 2010); see also
Hill, supra note 341.