WASHINGTON (Reuters) – The U.S. futures regulator may break with other agencies on a much-anticipated plan to ban most proprietary trading by banks, and could opt to put forth a slightly different version of the Volcker rule.
An independent approach from the Commodity Futures Trading Commission could raise questions about coordation and embolden banks to challenge the Volcker rule, although the agency -- which polices futures and derivatives markets -- is not believed to play a central role in implementing it.
Gary Gensler, the head of CFTC, is taking a "wait and see" approach to the rule, a key provision in last year's Dodd-Frank oversight law that would prohibit banks from trading for their own profit in securities, derivatives and certain other financial instruments.
It also would prohibit banks from investing in or sponsoring hedge funds or private equity funds.
"He said we might, if it's the will of the commission, put forward ... a virtually identical proposal with the other regulators, or we could go it alone," said Scott O'Malia, a Republican commissioner at the CFTC, who said he had spoken to Chairman Gensler on Friday. "He's not committing either way."
Both the Federal Deposit Insurance Corp and the SEC are scheduled to vote next week on the Volcker rule, which has already forced banks to scale back previously lucrative proprietary trading.
O'Malia said the decision was a bit of a surprise because in past rules, such as financial product definitions with the SEC and documentation with the FDIC, the CFTC worked with the regulators on the rules.
"It is odd when you look at in the past when there's been a kind of a negotiated solution of other regulatory agencies that we must do this," he said.
A source familiar with the CFTC's thinking said Gensler is waiting to see how Congressional lawmakers react to the Volcker rule proposal before deciding how to move forward.
A CFTC spokesman could not be reached for comment.
A person familiar with the rulemaking process said the CFTC is only tangentially mentioned in the Volcker rule, and it is unclear what the implications would be if the CFTC takes an alternative approach.
The futures regulator could chose to define a hedge fund and private equity fund in a rulemaking with the Securities and Exchange Commission, or it could chose to embrace the rule drafted by the SEC, this person said.
A September 30 draft of the rule that was leaked earlier this week listed the staff of 4 different regulators that had worked on the plan, but the CFTC was not among them. It later said the staff had consulted the CFTC on the proposal.
Supporters such as Democratic Senators Carl Levin and Jeff Merkley say the Volcker rule, will prevent banks, which enjoy government support through deposit insurance and access to Fed funding, from engaging in risky trades and force them to focus more on their customers' needs.
Wall Street banks such as Goldman Sachs and Morgan Stanley are watching whether the rule will still give them flexibility to hedge risk, and whether it will have a broad enough exemption for market makers.
Banks have said that if the regulations written to enforce the Volcker rule are too stringent, it could strip billions of dollars from Wall Street profits, hurt market liquidity and place U.S. financial companies at a disadvantage .
(Additional reporting by Dave Clarke and Sarah N. Lynch; Editing by David Gregorio)
WASHINGTON – Consumers slashed their borrowing in August by the most in 16 months. The drop suggests many worried about taking on new debt while the economy slumped and the stock market fluctuated wildly.
Fewer people used their credit cards. And a measure of demand for auto and student loans fell.
Total borrowing dropped $9.5 billion in August, the Federal Reserve said Friday. In July, borrowing increase $11.9 billion.
Americans have been struggling all year with high unemployment, meager pay raises and pricier goods and gas. That has depressed consumer spending, which fuels 70 percent of economic growth.
In August, consumer confidence tumbled to a two-year low, and retail sales were flat. The weak economy, along with gridlock in Washington and heightened concerns over Europe's debt crisis, rattled financial markets.
The August drop in borrowing was the largest since April 2010. Prior to that, consumers had increased their borrowing for 10 straight months.
Borrowing for auto and student loans plunged $7.2 billion in August. A category that includes credit cards fell $2.3 billion.
The overall decline lowered total borrowing to a seasonally adjusted $2.44 trillion. Borrowing is just 2.1 percent higher than the recent low hit in September of last year.
The August decline came as a surprise to economists who had been expecting a solid increase for the month. Some analysts said they believed the figure overstated the weakness in borrowing and reflected trouble the government has with seasonally adjusting the borrowing figures.
Troy Davig, an economist at Barclays Capital, said he expected borrowing to continue rising at a modest pace in coming months, reflecting his expectation that consumers will keep borrowing cautiously.
"We are looking for consumer borrowing to keep rising slowly at a pace that will not get ahead of income growth," Davig said.
Households began borrowing less and saving more when the country fell into recession and unemployment surged.
While economists believe borrowing will gradually increase in coming months, they don't expect consumers to load up on debt the way they did during the housing boom. Americans felt wealthier then and were more willing to take on added debt because of the soaring value of their homes.
The Federal Reserve's borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.
DETROIT – General Motors Co. is delaying plans to add a second shift at the factory that makes Chevrolet Volt electric cars.
The company said Friday it has found ways to make one shift more efficient, so it can produce the same number of cars as two shifts.
Spokesman Chris Lee says GM still will add 300 workers at the Detroit-Hamtramck plant — but not a second shift — by the end of this year to make more Volts.
In May, the company announced it would add a second shift late this year to increase Volt production from 16,000 per year to 60,000. A second shift will be added, though, but not until the last half of 2012, when the plant starts building the 2013 Chevrolet Malibu midsize sedan in addition to the Volt.
GM said the change had nothing to do with Volt sales, which have been slower than expected. The company said demand for the car still is strong and it's sticking with plans to build 60,000 next year. That number includes the Opel Ampera, a version of the Volt to be sold in Europe.
"This decision will significantly reduce costs, and has no impact on the plant's ability to make 60,000 Volts and Amperas," Lee said in a statement. "This approach is just a more efficient way to make the same number of vehicles."
Through September, GM has sold only 3,895 Volts, far short of its goal of 10,000 in the first year. But Lee said the car, which can run solely on battery power for about 35 miles before a gasoline generator kicks in, is only on sale in 27 states and should be for sale nationwide by year-end. "Dealers are still clamoring for them," he said.
GM engineers figured out a way to clear several bottlenecks that were slowing down the Volt plant and increase its assembly-line speed, the company said. For example, they were able to speed up the body shop, where the frame and other parts are welded together, by automating more tasks.
GM plans to add more than 200 jobs when the second shift arrives next year. The plant, which straddles the border between Detroit and the enclave of Hamtramck, now has about 1,000 workers. GM said in May that it would get another 2,500 jobs when second and third shifts are added.
In addition to the Malibu and Volt, the plant is expected to build the new version of the Chevrolet Impala, a large front-wheel-drive sedan, for the 2013 model year. GM has said it will invest $69 million for equipment at the plant. The plant stopped making two other big cars at the factory, the Cadillac DTS and Buick Lucerne, in June.
To accommodate the increased Volt production, GM will add a second shift at a plant that assembles Volt battery packs. The plant in Brownstown Township, Mich., south of Detroit, got 30 more workers who will start making battery packs this month, Lee said.
Many of the newly hired workers will make around $15 per hour, about half the pay of a veteran factory worker.
The new jobs are part of a larger GM expansion to create or keep about 4,000 jobs by investing $2 billion in 17 factories in the U.S.