Five Former Treasury Secretaries Endorse Volcker Rule

Since the nation's capital is enamored of bipartisanship in all its forms, it's surprising that today's letter from five former Treasury Secretaries - both Democratic and Republican - isn't front page news. The secretaries strongly endorsed the so-called "Volcker rule" in a letter to the Wall Street Journal.

The letter is only 232 words long, which proves that the Secretaries can write with admirable, uh, economy. says, It says, "The principle can be simply stated. Banks benefiting from public support by means of access to the Federal Reserve and FDIC insurance should not engage in essentially speculative activity unrelated to essential bank services." The authors add:

"Hedge funds, private-equity funds, and trading for speculative gains are activities carried out by thousands of nonbanking firms. These firms and funds are and should also be free to compete and to innovate. They should, like other private businesses, also be free to fail without explicit or implicit taxpayer support. Those few nonbank firms that present systemic risk should be subject to reasonable restrictions on capital, leverage and liquidity."

"Free to compete and innovate," and "free to fail without ... taxpayer support." Nicely said. The letter makes a last policy point: "Those few nonbank firms that present systemic risk should be subject to reasonable restrictions on capital, leverage and liquidity."

Volumes could be written on the definition of the word "reasonable," just as they have over the Supreme Court's "all deliberate speed" wording in its desegregation ruling. There are those who argue that the Volcker rule doesn't go far enough, just as there are those who argue that it essentially reinstates the Glass-Steagall Act. What is clear is that the Rule is a step in the right direction -- and now it has the bipartisan support that is so widely fetishized among DC insiders. So shouldn't it be a slam-dunk.

The five Secretaries "urge the United States to take the lead in the forthcoming G-20 meeting and other appropriate forums to achieve broad agreement on this principle among the leading financial centers." We'll expect strong support from the acolytes of the mythical Center - that magical place from which all wisdom flows - any minute now.

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