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Illustration: Aïda Amer/Axios

Venture capital funds soon will be eligible for a huge new pot of Wall Street money, after federal regulators yesterday weakened rules that were put in place after the financial crisis.

Driving the news: Many banks had been banned from balance sheet investing in venture capital funds due to the Volcker Rule, which was part of the Dodd-Frank financial reform package passed in 2010. That prohibition will now expire on Oct. 1, based on an announcement from a group of agencies that included the SEC and FDIC.

An argument in favor of this deregulation is that the Volcker Rule disproportionately hurt smaller, regional venture capital funds that had relied on local banks for fund capital.

An argument against this deregulation is that venture capital hasn't lost any of its high risk profile.

  • Other changes: Banks now will be allowed to invest in credit funds and make certain types of equity co-investments on private equity transactions (despite recent SEC criticism of PE co-investment practices). They remain prohibited from balance sheet investing in private equity funds and hedge funds.

Context: This move comes just weeks after the Labor Department loosened rules to allow defined contribution plans like 401(k)s to invest in alternative asset funds like private equity and venture capital.

The bottom line: The Volcker Rule was never fully implemented as Volcker and other advocates wanted and has been consistently watered down over time.

Go deeper

Regulators approve NYSE for direct listings with capital raise

Photo: ANGELA WEISS/AFP via Getty Images

The U.S. Securities and Exchange Commission on Wednesday approved the New York Stock Exchange's rule change that will allow companies to raise new capital as part of a direct listing.

Why it matters: Though there's been growing interest in direct listings, especially from Silicon Valley tech companies, it has not been an appropriate path to going public for many companies that need to raise capital as part of the process.

Aug 26, 2020 - Health

Hospitals charge a lot more when Wall Street owns them

Illustration: Aïda Amer/Axios

Hospitals owned by private equity firms rake in almost 30% more income than hospitals that aren’t, according to new research published this week in JAMA Internal Medicine.

Why it matters: Private equity is gobbling up more and more of the health care industry. Investors are buying up physicians’ practices, hospitals and the firms that negotiate prices with insurers.

DOJ pressed to enforce Al Jazeera foreign agent ruling

Illustration: Aïda Amer/Axios

The Justice Department is being pressed to enforce its own demand that the U.S. arm of Qatari broadcaster Al Jazeera register as a foreign agent.

Why it matters: The launch of Al Jazeera's new right-of-center U.S. media venture, Rightly, has refocused attention on the media company's alleged links to Doha, and DOJ's efforts to crack down on media outlets viewed as foreign interest mouthpieces.