You’re going to be taking out of the banks areas of investing that every 10 years or so, at certain points in the cycle, tend to have dramatic losses. Effectively you’re telling the system: We have to take the casino out of the utility…it won’t satisfy anybody who wanted really strict additional regulation of banks.

—James Ellman, president of Seacliff Capital: via Bloomberg

Yesterday’s passage of financial regulatory reform introduced the vaunted 3% rule, which limits an insured bank’s ability to invest in hedge funds. Sadly, the reporting has been so deficient on this that it is unclear what the 3% ultimately refers to.

The rule appears to comprise two dimensions: the size of their stake in the hedge fund; the amount relative to their overall balance sheet. But it’s hard to decipher how this will be measured. Is it 3% of the equity or 3% of the invested capital on the one side, or 3% of their tier one capital or 3% of their tangible common equity, on the other? Multiple articles on the same subject have come across the wire at Bloomberg, for example, and none of them are consistent with one another.