I'm busy, so I can't comment much, but a few thoughts from others worth highlighting. First, McMegan:
But even if it's not the best idea in the world, there are definitely many worse rules that we could think up. And after a stunning defeat on health care, the administration needs to score big points against the bankers quickly. If "Don't just stand there, do something!" is the order of the day, there are clearly worse somethings we can do.
If we do choose this "something", Americans should probably be clear that this is going to deal a major setback to New York as a world financial capital. Many of the rules that were undone in the last two decades were got rid of because they were making it too hard for American banks to cope with foreign competition. If we do this, America's financial sector will shrink, and our banks will lose a lot of business to foreign firms. That means, among other things, that we are going to lose big chunks of tax revenue, because bankers are very disproportionate contributors to federal coffers. It also means that New York's renaissance will probably slack off--and the people who complain about the bankers will discover how many city services those banker salaries paid for.
Felix Salmon started off thrilled, but cooled down later the day:
Now the proposed Volcker rule will try to cut back on some of that borrowing and gambling, but it probably wouldn’t have had any effect on their idiotic actions in mortgage-backed securities and collateralized debt obligations. Banks will always find a way to lose money: not all banks fail, but there are always bank failures. The important thing is that when banks fail, there aren’t massively destabilizing systemic consequences. And the only way to ensure that is to make the biggest banks smaller. It’s sad that the Obama administration seems to have flubbed this final chance to get that done.
My take? It's too soon to know for sure what the final bill will look like, but as currently constructed the loopholes are big enough to drive a Hummer-limo through. And I don't think it stands much of a chance if it would actually put American banks at a significant competitive disadvantage vis-a-vis the rest of the world.