new federal rule aimed at limiting the freewheeling trading of banks is prompting protests from local and foreign governments alike, which warn it could compromise their ability to borrow money needed to pay for public projects and operations.
States and localities say the new regulation, known as the Volcker Rule
, could make it more expensive for them to raise money from investors to pay, for instance, for environmental cleanup and housing assistance. In the Washington area, the rule could affect borrowing costs for agencies such as Metro and the authority that operates Dulles International and Reagan National airports, according to the District’s chief financial officer.
European governments warn the regulation could further aggravate their debt crisis, which is already roiling global financial markets.
The Volcker Rule, which was was included in the Dodd-Frank overhaul of financial regulation passed by Congress in response to the financial crisis, bans banks from speculating with their own money.