From Obama to Trump

Abstract Chapter 4 presents our first case study, analysing the Obama administration’s late conversion to the cause of bank structural reform in the US. This policy shift culminated in the surprisingly stringent ban on proprietary trading by banks (the ‘Volcker Rule’) in July 2010, but also led to a lengthy and often tortuous process of implementation. We argue that this significant but highly contested outcome was a consequence of two key features of the process. First, financial industry lobbying was highly fragmented and frequently divided, giving rise to powerful dissenting voices from within the industry (i.e., competitive financial power). Large Wall Street banks also faced concerted opposition from a powerful pro-reform coalition of consumer and activist groups that maintained pressure on Congress. Second, in the absence of venue shifting through which to build a bipartisan consensus, structural reform was highly politicized and shaped by the balance of power in a deeply polarized Congress. Hence, we show that the Volcker Rule came under sustained attack as Republicans, supported by large Wall Street banks, sought to delay and disrupt the rule-writing process using a variety of political, bureaucratic, and legal channels. This culminated in the Trump administration’s attempted repeal of the proprietary trading ban in 2017, which succeeded in relaxing some provisions for smaller banks.