A return to sanity in banking-Obama bank plan is a response that fits the crisis

[babylonsister]

http://www.marketwatch.com/story/obamas-proposes-something-for-wall-street-sanity-2010-01-21

A return to sanity in banking
Commentary: Obama bank plan is a response that fits the crisis

By David Weidner, MarketWatch


NEW YORK (MarketWatch) -- Goodbye Wall Street -- and good riddance.

The sweeping reform President Barack Obama unveiled Thursday is short on detail, but in its broadest terms it aims to both preserve Wall Street's ability to take risk and strengthen the money system at the core of banking.

Finally, someone with the power to make it happen is talking about a response equal in scope to the system's failure.

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The plan is good for Main Street. Under its terms, investment banks would no longer be able to stuff commercial-bank balance sheets with derivatives passed off as cash.

The big banks, like Bank of America Corp. would not be able to squirrel away credit-default swaps and collateralized debt or pass off their own potential time bombs to unsuspecting investors.

It's a point the president recognized when he said "trading often puts banks in direct conflict with their customers' interests."

What's a bank

Eliminating those conflicts is where the Volcker Rule is aimed. The president and former Federal Reserve Chairman Paul Volcker have agreed that banks need to get back to banking. The approach outlined Thursday may not be perfect, but its intent is to make the money and credit market safe and limit the impact of shadow bankers.

Think about how our language has reflected the shift in financial services. For 60 years after Depression Era reforms were passed, there was a clear line: Banks made loans and took deposits and investment banks handled securities -- stocks and bonds and their derivatives.

In the decade after the Gramm-Leach-Bliley Act repealed those reforms, everyone and their day-trading cousins turned into bankers.

Now, the landscape could change, not to a simpler time but to a modern financial system that has learned from its mistakes.

Will it cause some short-term pain? Yes. But when you consider the pain caused by bringing the casino into the bank lobby, by comparison, the Volcker Rule won't hurt a bit.

[Qutzupalotl]

1. Good news.

And nyah nyah nyah to the uncreccers of this. It's back up.

[TheKentuckian]

2. Its a good start on what needs to be done for sure.

[drm604]

3. Sounds good.

This is the kind of thing we should be hearing.

[Kdillard]

4. K and R. Good news.