Obama pushes for new regulations for US banks

http://news.bbc.co.uk/2/hi/business/8473294.stm

US President Barack Obama has proposed significant new curbs on the activities of banks to try to prevent future financial crises.

“Never again will the American taxpayer be held hostage by banks that are too big to fail,” Mr Obama said.

The plans – the most far-reaching yet -include limits to the size of banks and restrictions on riskier trading.

US stocks such as JP Morgan Chase and Bank of America fell sharply as the sweeping new rules were announced.

JP Morgan lost 6.6%, while Bank of America gave up 6.2%.

“While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse,” Mr Obama said.

His proposals also include a ban on retail banks from using their own money in investments – known as proprietary trading. Instead, banks would be limited to investing their customers’ funds.

“Banking reforms do not come bigger than those proposed by President Obama,” the BBC’s business editor Robert Peston said.

This may mean that some of the US’ biggest banks, such as Bank of America and JP Morgan, whose shares were badly hit, may have to be broken up.

The industry lobby group for banks suggested Mr Obama was trying to return the US to the past.

“The better answer is to modernize the regulatory framework and not take the industry and the economy back to the 1930s,” said the Financial Services Roundtable, an industry group that represents large Wall Street institutions.

In the UK, shadow chancellor George Osborne said that if the Conservatives win the next general election, they would impose an identical dismantling of UK banks to those suggested by the US president.

City Minister Lord Myners said the US proposals were “very much in accordance with the direction we have been setting”.

Mr Obama’s move is his first proposal since Republican Scott Brown’s shock victory in Massachusetts to win a Senate seat.

The Republican victory may make it harder to get Mr Obama’s proposals passed in the Senate, as they are more likely to get held up in political wrangling.

“This is a political effort because of what happened in Massachusetts,” said economist Peter Morici of the University of Maryland.

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the whole world is blaming obama for the sell off in the last 2 days in world markets and its because of these rules he wants to bring in..which was quickly announced once the massachusetts results were known..if the fox is making the rules for the henhouse do you really think hes going to do anything to hurt himself?..the banks will go on as they have..the public perception is that obama is beating up the banks..but hes not..

401

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~ by seeker401 on January 23, 2010.