Instructions: Read and answer the discussion question. Mention references please.
In an effort to reduce risk taking by banks, the Dodd-Frank Wall Street Reform and Consumer Protection Act implemented the Volcker Rule. This rule prohibits commercial banks from engaging in proprietary trading and restricts banks’ relationships to hedge funds and private equity funds.
The Volcker Rule might achieve the goal of reducing speculative trading by commercial banks, but there might also be negative externalities generated by the implementation of this rule. What are some of the unintended consequences of enacting the Volcker Rule?