Obama to Propose Limits on Risks Taken by Banks

[Frank Booth]

Source: NY Times

WASHINGTON — President Obama on Thursday will publicly propose giving bank regulators the power to limit the size of the nation’s largest banks and the scope of their risk-taking activities, an administration official said late Wednesday.

The president, for the first time, will throw his weight behind that approach and presumably ask that it be included in legislation now in Congress dealing with financial regulation. He also would prohibit proprietary trading of financial securities by commercial banks, including mortgage-backed securities. Big losses in the trading of those securities precipitated the credit crisis in 2008 and the federal bailout.

The president will speak at an appearance on Thursday at the White House with Treasury Secretary Timothy Geithner, an administration official said, speaking on the condition of anonymity because the talks were private. It will come after a meeting with Paul Volcker, the former Federal Reserve Board chairman, who has been campaigning for months for legislation that would separate commercial banking from proprietary trading. A similar discussion is percolating in Europe, led by Mervin King, head of the Bank of England. . . .

Now, in perhaps his most daring move, he is calling for a modern-day version of the Glass-Steagall Act, which in 1933 separated commercial and investment banking. The new separation would prohibit standard commercial banks from engaging in proprietary trading using funds from their commercial division.

Read more: http://www.nytimes.com/2010/01/21/business/21volcker.html?hp

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It sounds like Obama may finally be listening to Volcker. After a year of coddling the big banks, this is a good step in the right direction.

[thunder rising]

1. To be released as sternly worded letters.

[Frank Booth]

3. Well, supposedly he's going to ask that it be included in legislation.

Whether it actually gets passed without being watered down beyond all recognition is another issue.

[msongs]

2. how bout a transaction fee per stock/derivative sale to repay us for wrecking the USA nt

[Grand Taurean]

4. He better listen to Volcker as well as Reich and Krugman

if he wants a second term.

[hughee99]

5. How bad has it gotten that the government has to tell banks

to be careful with their friggin' money. Isn't that SUPPOSED to be what they do?

[HillbillyBob]

6. Correct I recall from when I knew bankers (all retired now)

they were very conservative with the risks they took with customers money.
Some were not so conservative socially..at least the ones I knew that went to Mardi Gras.

[Name removed]

7. Deleted message

Message removed by moderator. Click here to review the message board rules.

[ozymandius]

8. Why do you feel the need to spam this message board?

Off topic comments should be taken someplace else.

[struggle4progress]

9. When they'e "too big to fail," they have no incentive to be careful

[hughee99]

11. But the new rules won't just be for "too big to fail" banks.

Some banks weren't too big to fail, but they still made these investments.

I do agree, if a bank has essentially an unlimited line of credit (courtesy of the US taxpayers, via bailout), and a government that doesn't prevent them from making risky investments and then passing them off to investors (or even worse, one that buys up bad investments for them like fannie mae), what is the incentive. The worst case for these bank executives is that the government TEMPORARILY limits their bonuses, but they've been getting huge bonuses for years leading up to this as a result of this horse shit, so they've already made out on this deal.

[No Elephants]

13. It's always been that bad. That's why we had the Glass Steagall Act.

[midnight]

10. Anyone familiar with the financial reform bill?

I'm looking for a loophole I thought I remember reading. It states something to the tune of: congress no longer has oversite to bailouts of future banking crisis. Something to the fact that the money is just handed over no questions asked....

[VermeerLives]

12. And Geithner has concerns

about the new bank rules:

http://blogs.abcnews.com/politicalpunch/2010/01/geithner-has-concerns-about-presidents-proposed-new-bank-rules.html

So......is Geithner gonna go out the door??