Obama 149

Een serieuzer verslag over Obama's plannen.

Obama Proposes Tough New Restrictions for Nation's Top Banks

Friday 22 January 2010

by: William Fisher, t r u t h o u t | Report

(Image: Lance Page / t r u t h o u t; Adapted: signalstation, _J_D_R_, swisscan)

On the heels of a stinging defeat in the Massachusetts Senatorial race that dealt a major blow to passage of health care legislation, President Obama abruptly pivoted yesterday to change the subject to the state of the US economy and to back sweeping regulatory reforms on "too big to fail" banks.

The president noted that it was those too-big-to-fail banks that brought the US financial system to the brink of total collapse a year ago by taking "reckless risks" to generate profits and bonuses.

Clearly struggling to channel the populist anger sweeping the country, he proposed legislation that would govern how big the big banks can become and what lines of business they would be permitted or forbidden to run.

Bank holding companies - which include the major commercial and investment banks - would be prohibited from engaging in the hedge fund or private equity fund fields.
The legislation Obama outlined would also seek to place limits on industry consolidation. It would achieve this by curbing the growth of the market share of liabilities at the biggest firms. The New York Times reported that an existing cap, put in place in 1994, put a limit of 10 percent on the share of insured deposits that can be held by any one bank. That cap would be expanded to include liabilities other than deposits.

Bank holding companies would also be barred from proprietary trading - using bank funds to invest on behalf of their own accounts, often resulting in banks taking investment positions against the interests of their shareholders.

Calling this "the Volcker Rule," the president said commercial banks needed to get back to their core business - taking customers' deposits and lending money. Former Federal Reserve Chairman Paul A. Volcker has long advocated this position.

Volcker - who reportedly fell out of favor with Treasury Secretary Tim Geithner and former Treasury Secretary Larry Summers, now chairman of the president's National Economic Council - has long championed barring commercial banks from using deposits to finance trading in financial securities such as mortgage-backed securities. The losses sustained by commercial banks active in this kind of trading is generally thought to be a major cause of the 2008 crash and subsequent taxpayer bailout.

Most of the regulatory changes Obama proposed require legislation by Congress. This will not be easy, particularly since Republicans have already telegraphed their intention to oppose change - and since, as of Tuesday, the Democrats have lost their filibuster-proof, 60-vote majority.

Lees verder: http://www.truthout.org/obama-proposes-tough-new-restrictions-nations-top-banks56291