Volker Rule

The Volker Rule is not one rule but an intricate and integrated universe of specific rules all aimed at introducing and applying a set of rules to the game of finance.  Finance is the name of the game.  The rules that apply to regulate the game is one subset of the total finance game if the game was broken into its conceptual component parts.  Rules exist control the play of the game.  They can be conceptually extracted and looked at in isolation from the game but in operation they are an integral part of game play.

The nature of Business Rules is described by Wikipedia here.  Finance Rules is a subset of the parent class: Business Rules.  Business Rules are a subset of a parent class: Rules.  In the parent/child relationship of the scheme of things there might be other intervening classes between Business Rules and the computer science superclass: Rules.  Those other intervening classes are, for now, beyond this examination but in reality, it gets complicated.  The fact that it gets complex and complicated is the entire reason for expressing it all as the best picture to reduce complexity to a readily apparent and manageable conceptual expression.

The conceptual expression of the Volker Rule is 500 pages of words.  All these words relate to one another within the document and relate to other words describing rules elsewhere either formally in law or conceptually as an established way of doing business or governance.

Words worked well and will always work well to express fundamental conceptual relationships.  Our Constitution is an example.  Complexity grows quickly in implementing our social structures all the way down to the basic operating level where the rubber meets the road.  This is true of rules associated with the complexity.  As more rules are made, the more they relate and must be consistent with other rules.

If it is agreed that all rules ultimately result in a yes/no decision control and no two rules should contradict each other or in application to the same case then the rule system has integration and validity. 

A structure of words, like the Volker Rule requires that we establish in our minds the conceptual relationship model of all the rules it contains as well as the relationship of those rules to conceptual structure of finance.  That is a lot to hold in an mind map!  A mind map that exists in our brain.  Few can hold all that conceptual understanding in their heads.  They are subject matter experts and exceptional people.  If that mind map in their head is expressed as a relationship model using any of the current software modeling tools it is much easier for everyone to understand and consequently modify and refine.

If everyone could easily understand the things that only subject matter experts understand now what happens to the need for subject matter experts?  They are still needed but not as a repository of existing complex descriptions expressed in written language but leaders at the forefront of exploring, expanding and refining the existing body of knowledge and reduction of its complexity to models we all understand.  Perhaps that is nothing more than the progression of any and all knowledge from an art to a science.

The art of having the conceptual model of anything only in the head of an expert has always progressed for the good when that art is expressed in a manner that we all understand and based on that understanding can intelligently apply our collective thinking.

Read the Volker Rule.  Read this link that has the following title: And then this link that is the actual OWS comment:

Occupy the SEC’s Comment Letter Objects to Excuses for Watering Down Volcker Rule (#OWS)

 And then this link that is the actual OWS comment:

 It is discussion on a complex set of rules all described in word relationships!  I would have to study this for a long time to become a subject matter expert to have an effective idea about it much less make any contribution to it.

The rules of the game should not be so hard to understand.  They are when expressed only in word relationships.  They are better described in conceptual models better suited to the task of presenting information.  The problem is that we all speak and understand in words.  We do not all speak and understand in models that are a better system of expressing complexity.

I sincerely appreciate the contribution that the people who produced the OWS submission:   Akshat Tewary, Alexis Goldstein, Corley Miller, George Baily, Caitlin Kline, Elizabeth K. Friedrick, Eric Taylor, and others.  They are subject matter experts that took their mind maps in their heads that understood all the complex relationships and produced a written document to improve the integrity and effectiveness of the Volker Rule.  It was all in their heads because they are smart and spent years reading words to acquire the financial model understanding in their heads, which they hold in common.

My most fervent wish is that the complex financial model they have in their heads was expressed as formal computer science information model having greater ability and accuracy to convey information beyond the ability of pure word based model to give me an understanding of the rule problem and the solutions.

This is the information age!  Yet we are still not using the best tools at our disposal to embody information and convey it in an increasingly complex system.  Our education system is not adequately preparing us to do this.  

The Business Rules Group is laying ground in the direction of a model for business rules development and means to express rules.

Business Rule Engines are moving the domain of rules toward a computer base.  Then look at who IBM wants to sell its ILOG software to:

discussed here 

ILOG:  

ILOG -- a recognized industry leader in Business Rule Management Systems (BRMS), visualization components, optimization and supply chain solutions enrich IBM software portfolio and fortify IBM's Smarter Planet initiative.

Then look here at who IBM wants to sell its ILOG software to at their link.  Business and Finance:

I will bet that the major financial institutions have invested in the computer based modeling of government rules and regulations to create a schematic model of all the complex relationships involved and expressed in high level abstraction models for top level management use.  Otherwise who would they depend upon to draw the picture of the model for them.  The answer is their lawyers.  Computer based models would be more accurate and effective, organize and integrate the information better.  Progressively they would replace the role of both lawyers and financial subject matter experts.  

Perhaps the banksters have already re-engineered the Volker rule to a computer model designed to manage rule based systems.  Top management therefore gets a better picture and understanding of the rules proposed by Volker.  Then based on a better understanding of the rules and how they effect their business they "translate" what their computer model tells them back in to a word based submission to address the original word based rule document.

If the banksters are doing that then they would also translate the OWS submission using their computer based rule model software to see exactly how it relates to their plans.

There is an asymmetry  here:  One side is using the old fashion method of presenting rules in a word document.  The other side is using computer technology to express the word document model is a more rational comprehensible, understandable and manageable manner.  Once they understand the problem domain from that standpoint they produce a word based submission back to the originators of the word based rules.  

The banksters have the upper hand as well as all the money to spend not only on buying new rules but examining existing rules expressed in volumes of words and translated into software systems that make them more manageable.  I am sure that they just love doing business the old way: To externally deal with all the complexities of finance with a whole lot of words.  To internally deal with it using computer information technology.

What tools were the creators of the OWS submission regarding the Volker Rule using other than what is in their heads?  Doing it the old fashion way?

There is a legacy volume of government rules and regulations in a magnitude beyond my imagination that has been generated over the years and left to us in the form of written words.  One political party wants to do away with them, especially those that regulate business.  Some political party must take up the challenge of restating and presenting a better means to conceptually present all the rules using information technology.  It would eliminate conflicts and erroneous rules in the system as well as rules contrary to our national guidance and objectives.

Maybe the first subset where that should be done is in the financial sector.  If the financial sector has already done this then perhaps the government should just subpoena  their high level models  or nationalize them instead of doing, belatedly, exactly what they have probably already done.