The White House's forceful support for the rule came after the Treasury Department said earlier in the day that it backed "mandatory limits" on banks trading for their own account.
President Barack Obama had originally framed the proposed Volcker rule on Jan. 21 as an outright ban, which stunned markets and complicated extended negotiations in Congress over legislation to tighten bank and capital market regulation.
"We're not walking away from and we're not watering down that proposal one bit," White House spokesman Robert Gibbs told reporters when asked about the outlook for the rule authored chiefly by White House economic adviser Paul Volcker.
"We're not walking away from what the president outlined on the Volcker rule," Gibbs said at a briefing.
As he spoke, the U.S. Senate Banking Committee continued negotiating long-awaited regulatory reform legislation. Release of a bipartisan bill by two key lawmakers had been expected this week, but lobbyists said it may wait until next week.
The committee is considering including a watered-down version of the Volcker rule in the bill, which will also propose new rules to protect financial consumers, rein in derivatives markets and tackle the "too big to fail" problem.
Financial services industry lobbyists said senators may add language to their bill from a bill approved in December by the House of Representatives.
The House bill would allow, but not require, regulators to restrict proprietary trading at firms judged to pose a risk to the stability of the financial system. Regulators could also order firms out of the hedge fund business under the Democratic House bill, which got no votes of support from Republicans.
Obama's January proposal was tougher. He proposed that banks "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 Volcker rule could affect as much as 10 percent of net revenues at Goldman Sachs
The statement, which was in keeping with testimony from a top Treasury official on Feb. 2, also reiterated the Treasury's support for "related restrictions on owning or sponsoring hedge funds or private equity funds, as well as on the concentration of liabilities in the financial system."
HOUSE BILL CLOSELY SIMILAR
Those parameters align closely with the House bill. One of its chief authors, Representative Paul Kanjorski, chairman of the House Capital Markets Subcommittee, told reporters on Tuesday he would support keeping the "measured" language in the House bill or the White House's proposal.