U.S. banks pushed regulators to widen proposed restrictions ontrading and hedge-fund ownership by foreign firms, then encouragedgovernments around the world to complain about the rule'sreach.

The two-pronged lobbying strategy resulted in foreign officialsjoining U.S. lenders to push back against the Volcker rule, namedafter former Federal Reserve Chairman Paul A. Volcker andincorporated in the 2010 Dodd-Frank Act.

“The criticism of foreign governments on behalf of their banksis helping U.S. banks fight the rule,” said Anat Admati, aprofessor of finance at Stanford University. “It also muddies thewater, shifting the debate away from the main issue, which isreducing the risks banks impose on the economy.”

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