NYT: Obama to Propose Limits on Risks Taken by Banks

[flpoljunkie]

January 21, 2010
Obama to Propose Limits on Risks Taken by Banks

By JACKIE CALMES and LOUIS UCHITELLE

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 an approach long championed by Paul A. Volcker, former chairman of the Federal Reserve and an adviser to the Obama administration. The proposal will put limits on bank size and prohibit commercial banks from trading for their own accounts — known as proprietary trading.

The White House intends to work closely with the House and Senate to include these proposals in whatever bill dealing with financial regulation finally emerges from Congress.

Mr. Volcker flew to Washington for the announcement on Thursday. His chief goal has been to prohibit proprietary trading of financial securities, including mortgage-backed securities, by commercial banks using deposits in their commercial banking sectors. Big losses in the trading of those securities precipitated the credit crisis in 2008 and the federal bailout.

more...

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

[FreakinDJ]

1. Bring back the Glassman Steagall Act

Since when did RATpubliCON deregulation work for the betterment of the country

[quantass]

4. With this Admin in office?...We can always whisper of a dream...

I would LOVE for this act to return but that would require a clear desire to help the American people.

[FreakinDJ]

5. His advisor's keep recommending "Tiny Steps" in Banking Regs

Who knows -

The thinking be if they do too much too swiftly they'll further stress a fragile recovery.

If they don't do any thing it will fail under the weight of it's own greed

[ShortnFiery]

2. I can hear the conversation: "Come on guys, pretty please?!?"

[flpoljunkie]

3. Simon John weighs in on Huffpo: Paul Volcker Prevails

Simon Johnson
January 21, 2010

Paul Volcker Prevails

Paul Volcker, legendary central banker turned radical reformer of our financial system, has won an important round. The WSJ is now reporting:

President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country's biggest banks, marking the administration's latest assault on Wall Street in what could mark a return -- at least in spirit -- to some of the curbs on finance put in place during the Great Depression.

This is an important change of course that, while still far from complete, represents a major victory for Volcker - who has been pushing firmly for exactly this.

Thursday's announcement should be assessed on three issues.

Does the president provide a clear statement of why we need these new limits on banks? The administration's narrative on what caused the crisis of 2008-09 has been lame and completely unconvincing so far. The president must take it to the banks directly - tracing the origins of our "too big to fail" vulnerabilities to the excessive deregulation of banks following the Reagan Revolution and emphasizing how much worse these problems became during the Bush years.

Are the proposed limits on the total size (e.g., assets) of banks, or just on part of their operations - such as proprietary trading? The limits need to be on everything that banks do, if they are to be meaningful at all. This is not a moment for technocratic niceties; the banks must be reined in, simply and directly.

Is there a clear strategy for (a) taking concrete workable proposals directly to Congress, and (b) win, lose, or draw in the Senate, running hard with this issue to the midterm elections?

Push every Republican to take a public stand on this question, and you will be amazed at what you hear (if they stick to what they have been saying behind closed doors on Capitol Hill.)

The spin from the White House is that the president and his advisers have been discussing this move for months. The less time spent on such nonsense tomorrow the better. The record speaks for itself, including public statements and private briefings as recently as last week - this is a major policy change and a good idea.

The major question now is - will the White House have the courage of its convictions and really fight the big banks on this issue? If the White House goes into this fight half-hearted or without really understanding (or explaining) the underlying problem of unfettered banks that are too big to fail, they will not win.

http://www.huffingtonpost.com/simon-johnson/paul-volcker-prevails_b_430869.html