White House economic adviser Paul Volcker firmly opposes exempting banks from his proposal to ban them from hedge funds or private equity funds when they make only small investments, according to a letter obtained by Reuters on Tuesday.
Big banks are seeking exemptions for small, or "de minimis" investments, under the proposed rule.
"I absolutely oppose any such modification" of the U.S. Senate's Wall Street reform bill, Volcker wrote in the May 17 letter to Senate Banking Committee Chairman Christopher Dodd.
Dodd is heading the Senate's negotiating team that is going into conference committee talks this week with the U.S. House of Representatives to craft a final compromise on financial reform legislation.
The Senate approved its reform bill on May 20.
The Volcker rule, as proposed in January by Volcker and President Barack Obama, would curb proprietary trading by banks for their own accounts unrelated to customers' needs, and their sponsorship of hedge funds and private equity funds.
Senate aides said large banks are continuing to press for a carve-out in the final bill that would let them invest in outside funds for marketing or relationship purposes.
The Volcker rule is widely expected by analysts to become law -- in some form -- as part of a final House-Senate bill expected to emerge from the conference, likely by July 4.
The final bill would have to be approved by each chamber before it could be sent to President Barack Obama to be signed into law, almost two years since severe banking and capital market crisis of 2007-2009 that hammered economies worldwide.
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