Volcker Rule Attacked

In testimony today, Federal Reserve Gov. Daniel Tarullo said regulators are having problems writing the rule in such a way that it didn't restrict permitted trades and yet caught prohibited ones.

He said the agency is "more than open" to alternatives to its proposed approach, saying regulators are striving to avoid complexity. "The approach taken in the proposed rulemaking is concededly not a simple one," he said.

Acting Comptroller of the Currency, John Walsh, testified that banks without U.S. operations could benefit from the rule, saying that foreign jurisdictions "have not adopted restrictions resembling those in the Volcker rule."

"U.S. banks competing with these foreign banks will operate at a competitive disadvantage," Walsh said.

In his testimony, TIAA-CREF's Evans defended private equity investments undertaken by insurers.

He said they generally offer a long-term investment horizon and are an integral tool for ensuring adequate returns and higher yields for policyholders and customers, "which is particularly important in the current low interest rate environment."

In addition, Evans said, many private equity investments provide necessary long-term capital to important sectors of the economy, including infrastructure projects to build roads, airports, wind farms, and other renewable energy projects, fueling jobs and growth.

Evans said TIAA-CREF believes that the provision in the DFA providing a limited exemption for insurers was aimed at "providing insurance companies greater latitude in their ability to sponsor and invest in covered funds than other banking entities."

Evans said the insurance industry believes the rule should allow insurance companies to sponsor and invest in private funds without regard to the investment limits imposed on other banking entities engaged in similar activities, subject to regulation in accordance with applicable insurance company investment laws.

However, the proposed rulemaking does not expressly do that, Evans said.