California Public Employees' Retirement System (CalPERS) senior portfolio manager Anne Simpson is scheduled to testify in front of a US Congressional committee Tuesday morning and is expected to publicly declare CalPERS’ support for the Volcker rule.
“CalPERS believes that Dodd-Frank, as enacted, will establish an effective framework for promoting the safety and soundness of capital markets and providing institutional investors the protections and rights to ensure markets function,” according to Simpson’s written testimony, made available through the committee’s website. CalPERS declined to comment on the testimony.
The testimony also specifically backs the so-called Volcker rule, an element of Dodd-Frank that would severely limit US banks’ ability to invest in or manage private equity and real estate funds. A final version of the Volcker rule is expected later this July, but industry sources expect US regulators to miss this deadline.
The testimony includes a 13 February letter signed by several CalPERS executives – John Walsh, Jennifer Johnson, Robert Feldman and Elizabeth Murray – that “strongly supports” regulatory efforts to implement “prohibitions and restrictions on proprietary trading and certain interests in, and relationships with, hedge funds and private equity funds” in relation to the Volcker rule.
In her statement, Simpson highlights limits on proprietary trading as particularly important in the wake of a recent trading scandal involving JP Morgan Chase that forced chief executive officer Jamie Dimon to explain the bank’s trading rationale in front of two congressional panels.
“The recent trading losses by JPMorgan Chase illustrate the importance of ensuring that regulators impose careful constraints on proprietary trading by federally insured financial institutions,” she said in the statement. “Although the firm’s CEO has asserted that ‘no client, customer or taxpayer money was impacted by this incident,’ there is no doubt that clients, customers and taxpayers were exposed to excessive risks due to proprietary trading.”
The House of Representatives Committee on Financial Services hearing – titled “The Impact of Dodd-Frank on Customers, Credit, and Job Creators” – will also include testimony from Thomas Deas of the FMC Corporation; Tom Deutsch of American Securitization Forum; Dennis Kelleher of Better Markets; Thomas Lemke of Legg Mason & Co. and Paul Vanderslice of the Commercial Real Estate Finance Council.
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