Now that the deep in the pockets of big banks Republicans are in charge of the house, the in coming Republican front-runner to head a key U.S. congressional bank oversight panel has urged regulators to consider whether a new Volcker rule limiting risky trading by U.S. banks may handicap them globally, according to a letter obtained by Reuters on Thursday. Rep Bachus warns Geithner on "Volcker rule" By Kevin Drawbaugh WASHINGTON | Thu Nov 4, 2010 8:35pm EDT (Reuters) - The Republican front-runner to head a key U.S. congressional bank oversight panel has urged regulators to consider whether a new rule limiting risky trading by U.S. banks may handicap them globally, according to a letter obtained by Reuters on Thursday. In a sign of the policy position of the heir-apparent to the chair of the U.S. House of Representatives' Financial Services Committee, Representative Spencer Bachus raised basic questions in the letter about the impact of the "Volcker Rule" enacted into law in July. "If the Volcker Rule's prohibitions are expansively interpreted and rigidly implemented against U.S. institutions while other nations refuse to adopt them, the damage to U.S. competitiveness and job creation could be substantial," Bachus wrote in the November 3 letter to Treasury Secretary Timothy Geithner and other top regulators. The "Volcker Rule" is a provision of the landmark Wall Street reforms signed into law in July by President Barack Obama. The reforms won approval in Congress over the opposition of most Republicans, including Bachus of Alabama. The three-part rule curbs proprietary trading by banks unrelated to customers' needs; limits the involvement of banks in hedge funds and private equity; and imposes a new cap on the domestic expansion capacity of the largest U.S. banks. The rule is named after its author, former Federal Reserve Chairman Paul Volcker, an outside economic adviser to President Barack Obama. Details of the complex rule are being fleshed out by regulators and implementation will take place over several years. Separately on Thursday, the two main proponents of the Volcker rule in the Senate wrote regulators asking them to strictly enforce the rule and be vigilant about attempts to get around enforcement. Democratic Senators Carl Levin and Jeff Merkley wrote that, in particular, the rule should seek to stop banks from conducting proprietary trading under the guise of "market making." To police against this activity the senators said the rule should contain a time element, arguing the longer a position stays on a bank's books the more likely it will be viewed as a proprietary trade. They also argued that the rule should give regulators the authority to examine all trading accounts; otherwise, proprietary trades could take place in a type of account that is exempted from the rule. In a nod to the concerns raised by Bachus and others, Levin and Merkley urged regulators to press other countries to adopt policies similar to the Volcker rule. This is the second letter the senators have sent regulators. Last week they penned a letter with 16 of their colleagues advocating a two-tiered regulatory approach whereby the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission would monitor the rule on a day-to-day basis while banking regulators performed deeper and longer reviews. Banking lobbyists are hoping to soften the impact of the Volcker rule by influencing the implementation process, which Republicans also will seek to accomplish through congressional committee oversight, according to policy analysts. In Tuesday's midterm U.S. elections, Republicans won a majority of the seats in the House, putting Bachus on track to take over the Financial Services Committee next year. It is currently chaired by Democrat Barney Frank. "It is truly astounding that less than a day after winning control of the people's House of Representatives, Republican leaders are already hard at work doing the business of big Wall Street banks," said Tom McMahon, executive director of Americans United for Change, a progressive lobbying group.