The so-called Volcker Rule is a financial reform proposal by Paul Volcker, President Obama’s economic advisor. The “Volcker Rule” would bar bank and financial holding companies from putatively high-risk activities like private equity investing, managing hedge funds, and proprietary trading. As the President noted,
“Banks will no longer be allowed to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit, unrelated to serving their customers.”
The implications:
The issue at hand is that it is a real solution to a non-problem. Firms that combine elements of commercial banking, broker-dealers & prop trading can pose systemic hazards but this rule focuses on the least problematic issue–commercial banks are simply not significantly involved in private equity or hedge fund-like investing.

Tony James, president of Blackstone, notes:
I think it’s too vague to know, frankly. I don’t think it’s going to in any way make the system more systemically safe. [...] Prop trading, hard to know how that’s defined, I don’t know how you define the role between what’s hedging and what’s really speculative bets. [...] think it’s one of those admirable goals and I think that will be in the details.”
Instead, according to Naked Capitalism, many of the credit bubbleʼs excesses can be traced to the “shadow banking” sector–the intersection between commercial banking & investment banking business models. “Shadow banks” take illiquid credit and interest rate risk (like commercial banks), but fund themselves principally through the wholesale markets (like investment banks). With lower capital requirements & funding advantages, some estimate it compromises of 60% of the US credit system. This is the real problem:

While it seems like Congress will reject the Volcker reform, it is possible that similar bills will surface this year.
Source:
http://www.nakedcapitalism.com/2010/02/how-the-volcker-rule-misses-the-shadow-banking-system.html
http://online.barrons.com/article/review.html
http://blogs.reuters.com/financial-regulatory-forum/2010/02/09/us-stock-exchange-heads-take-aim-at-volcker-rule/
http://blogs.reuters.com/felix-salmon/2010/02/03/the-volcker-rules-loopholes/
http://dealbook.blogs.nytimes.com/2010/02/02/davos-bankers-seek-united-message-on-volcker-rule/