Compliancex

The Volcker Rule is now on the back burner. And pretty soon, politicians are going to turn off the flame.

On April 19, big banks breathed a collective sigh of relief when the Fed announced a two-year extension, saying it expected banks to engage in “good-faith planning efforts” to comply with the Volcker rule’s proprietary-trading restrictions by July 2014.

Not only has the compliance period been extended until 2014, but the Fed hinted strongly that even that date is not firm, leaving itself plenty of opportunity to extend that deadline into the not foreseeable future.

The Fed is simply putting the Volcker rule on hold until November 2012.

If Romney is elected, he has promised to destroy the Volcker rule.

If Obama is elected, it is open to debate whether or not he will continue his attack on Wall Street. With four more years in office guaranteed, regulating the American economy may no longer be such an urgent priority for him. The financial crisis of 2008 will be fading into the distant past, and with so much opposition in the way of getting the Volcker rule passed, a compromise may seem like the only solution.

In other words, the extension of the Volcker Rule deadline until July 2014 is a huge victory for Jamie Dimon and his peers. They will likely continue their strategy of wearing down legislator resistance to their whims until legislators give up the fight against them.

After a private meeting with Dimon, Blankfein, et. al. last Wednesday, Federal Reserve governer Daniel Tarullo commented in the Washington Post,

“For some time my concern has been that the momentum generated during the crisis will wane or be redirected to other issues before reforms have been completed. This remains a very real concern.”

Moreover, what energy legislators have left will quickly dwindle when matched against the seemingly endless anti-regulation efforts of America’s largest financial institutions.

Beth Connolly is Editor-in-Chief of the Wall Street Job Report and the Compliance Exchange. She blogs creatively at When Nutmeg Met Basil. Connect with her on LinkedIn or Twitter.