Thursday, January 21, 2010
President Obama announced two additional proposals for reforming the nation's banks. The first, which he named the Volcker Rule after its proponent, Paul Volcker (who stood behind the President at the press briefing), would prohibit banks from owning, investing, or sponsoring hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers. The second would prevent the further consolidation of our financial system. There has long been a deposit cap (10%) in place to guard against too much risk being concentrated in a single bank. Under the proposed reform, the same principle would apply to wider forms of funding employed by large financial institutions in today's economy.
Continuing with his verbal campaign against big banks, the President said:
So if these folks want a fight, it's a fight I'm ready to have. And my resolve is only strengthened when I see a return to old practices at some of the very firms fighting reform; and when I see soaring profits and obscene bonuses at some of the very firms claiming that they can't lend more to small business, they can't keep credit card rates low, they can't pay a fee to refund taxpayers for the bailout without passing on the cost to shareholders or customers -- that's the claims they're making. It's exactly this kind of irresponsibility that makes clear reform is necessary.
Some early press coverage of his announcement:
From SIFMA President Tim Ryan's response to the President's proposals:
“Like the President proposed last year, we continue to believe the best way of achieving those goals is to establish a tough, competent and accountable systemic risk regulator. We believe providing for strengthened regulatory oversight and flexibility like that originally proposed by the Administration, as opposed to arbitrary restrictions on growth and activities, is a more effective way of mitigating systemic risk and ending ‘too big to fail’.