The FDIC unanimously approved today an initial version of the Volcker rule, a centerpiece of Dodd-Frank. The rule limits banks from investing in hedge funds and bans proprietary trading. Four other federal agencies must still vote on the proposal, which will be open for public comment until January. The SEC is scheduled to vote on Wednesday. This morning, ahead of the FDIC’s vote, the Federal Reserve released the proposed rule for public comment. The flurry of activity kicked off what is sure to be a lengthy and contentious battle over the esoteric details of the Volcker rule. Much of the debate has already centered on controversial exemptions to the rule. While the regulation prevents big banks from placing bets on many stocks, corporate bonds and derivatives, it exempted trading in government bonds and foreign currencies. The rule also provides a path for getting around the ban. For instance, banks can hedge against losing money while carrying out a customer’s trade. Market-making and underwriting are exempt, too, though the line is often blurred between these pure client activities and proprietary bets. The proposal spells out an expansive internal control regime that banks must adopt, putting the onus on the industry to police its own trading. Under the rule, banks must turn over a battery of information to regulators, including nearly two-dozen metrics to gauge whether a bank is helping clients or trading for its own benefit. Wall Street has mounted a united front against the rule, saying it would eat into profits at a difficult time for the banking industry. The proposal left many details to be developed in coming months. It posed hundreds of questions for the public and the financial industry to address, leaving the window open for significant changes.   [Dealbook, 10/11/11]