The long-expected Volcker Rule, an element of Wall Street reform efforts, was released on December 10.

The rule looks to prevent banks from taking risks with money insured by the government, discouraging risk taking on the American taxpayer’s bill.

While the rule alone may not end “Too-Big-To Fail” institutions, the rule is a step in the right direction, attempting to more closely align the priorities of banks with the interests of taxpayers and consumers.

Americans for Financial Reform (AFR) released a statement on the rule’s final approval, saying:

Pressure from Wall Street and its lobbyists to undermine the law will not end with finalizing the rule.  Public engagement was crucial in pushing the rulemaking process, and it will need to be sustained in the implementation process.  The Volcker rule cannot be allowed to disappear into a private conversation between Wall Street and its supervisors.

The Volcker Rule prevents banks from participating in risky securities and derivatives markets. Banks will be restricted in engaging in “proprietary trading”, which can expose banks to high risks and huge losses.

Senators Jeff Merkley (D-OR) and Carl Levin (D-MI), proponents of the Volcker Rule, released a statement, saying, “We fought for the Merkley-Levin provision of the Dodd-Frank Act in order to put a strong firewall between banks and hedge fund-style high-risk trading.”

Prior to reductions in regulation in the late 1990’s, banks were for decades prevented banks from participating in the securities and derivative markets by the Glass-Steagall Act, which was repealed in 1999. The relaxed regulation of banks and the abuse of hedging played a role in the financial crisis that began in 2007, as well as the more recent London Whale incident in which JPMorgan lost $6.2 billion in high-risk speculative trading.