Private Sector Influence on the U.S. Regulatory Process: A Study of the Volcker Rule

Abstract

In 2008, the world witnessed the outcome of 30 years of deregulation in the global financial sector. In response to public outrage over bank bailouts, the U.S. Congress passed the Volcker Rule in order to limit risky speculative trading activities of banks. However, the Volcker Rule, in its final version, was watered down substantially by private sector actors such as banks, financial institutions, and trade associations. The purpose of this paper is to present empirical research showing how private sector actors’ in the U.S. influence financial regulation, using the Volcker Rule as an example. The examination of the data shows correlations between private sector actors methods’ of influence (lobbying expenditures, access to regulators and market share) and their rates of success with their requested changes made during the comment period of the proposed rule and those incorporated in the final version issued by regulators.