Now that brutal police crackdowns and the winter cold have pushed Occupy Wall Street out of public parks and the headlines, the movement has pivoted toward the more dry world of public policy. Frequently admonished by detractors that it lacks policy goals, the Occupy movement is proving its critics wrong: this week they submitted 325 pages worth of commentary and criticism on the Volcker Rule to the SEC.
The public comment phase for the part of the Dodd-Frank Act known as the Volcker Rule — which would ban proprietary trading among depository institutions — has just closed, and the Occupy movement, along with 15,000 others, submitted a whale of a response.
Occupy the SEC, a new wing of the centerless movement, bills itself as “a group of concerned citizens, activists and financial professionals.” Among them, they have decades of experience in the finance industry.
With such experience comes deep understanding of money’s machinations. And no one can doubt that OSEC has a nuanced and thorough understanding of the proposed Volcker Rules’ implications and shortcomings, especially not after checking out its novel-length, annotated letter.
Chief among their complaints is that the proposed rule has too many exemptions, which banks could exploit to continue risky proprietary trading. Specifically, exemptions for market making and repurchase agreements in the proposed rule are troubling to them.
“There are a lot of gaping holes that…seem to be put in for reasons that have nothing to do with following and being faithful to the statute,” said Eric Taylor, an unemployed anthropologist, and OSEC member, in a phone interview.
Akshat Tewary, a lawyer who works on OSEC part-time, elaborated on his concerns about the market-making exemption: ”The agencies could have defined pretty bright line rules, strict rules as to what is and what is not market making…Market making is difficult to distinguish from proprietary trading. If they, for instance, imposed a disgorgement standard whereby any money that’s made off of the capital gain on the position is automatically lost by the trader, so they could only make money off of the bid/ask spread, for instance, if they put that in the rule, it would be clear what’s market making and what’s not. It would be more apparent both to regulators as well as the industry. But they didn’t do that.”
This isn’t the Occupy movement you might have seen on the news, blocking the port in Oakland or people’s microphoning their message around Lower Manhattan. On the other hand, it is — Occupy prides itself on its direct-democracy model, which leads to a variety of opinions represented by the movement, for better or worse. But writing a 325-page response to a 500-page rule simply requires patience and focus that the outdoors doesn’t afford.
The Effects of Moving Indoors?
Tellingly, neither Taylor nor Tewary were ever “campers,” to use their word, when Occupy Wall Street was more literal in their goals. They did, however, get involved in the General Assembly meetings, which eventually led them to the Alternative Banking group of the GA, and which eventually led to Occupy the SEC.
OSEC knows its stuff, and one of its concerns is that the SEC does not. A common narrative about the collapse of 2008 is that the SEC was simply in over its head. It lacked the staff and the know-how to understand the risk that complex securities posed to the economy. Tewary worries that the Volcker Rule implementation might be the same.
“The rule doesn’t really make any differentiation between liquid and illiquid [markets], so we focus a lot of our criticism on that point,” he said. It was illiquid securities that multiplied risk and led to the collapse of 2008, therefore, the rule should focus on these, said Tewary.
Furthermore, Tewary is concerned that the proposed rule doesn’t allocate any additional funds to the SEC, though it does impose significant regulatory burdens.
“They’re understaffed and they’re underfunded…What they’ve done is they’ve basically made [the rule] more complicated, [with] more judgement calls to make,” he said.
Woody Allen once said that 80 percent of success is showing up. When it comes to complex policy-making decisions, holding a sign outside the building isn’t enough — you have to become a player, a stakeholder. You need to be on the record.
Best of all for the movement, no one in their right mind could say that Occupy Wall Street doesn’t have any policy goals. It does. 325 pages worth.