Today Obama took Paul Volcker’s advice and proposed new restrictions on the size and activities of big banks. Depository institutions will be barred from proprietary trading, that is making bets with depositor money, part of which is insured by the FDIC. The administration will seek tighter limits on the size and concentration of depository institutions; the new restrictions would go beyond the 10% of insured deposits limit. Also these banks could not own, invest in or advise hedge funds or private equity firms. See the January 21st WSJ report here.
While stopping short of Glass-Steagall which would require the complete separation of commercial and investment banking, this is a good proposal. Hopefully it will force some divestitures among the behemoth financial institutions. In any case the taxpayer will be better protected.
Little wonder serious restrictions are necessary. The liberal giant Goldman Sachs, darling of the Democrats, announced fourth quarter earnings today of $4.95 Billion on revenues of $9.62 Billion–that’s an embarrassing 51%! We taxpayers helped them get there!
Taxpayer bailouts of Wall Street firms should never be allowed to happen again. Firms should be forced into bankruptcy, allowed to fail. A few good healthy failures would put a lot more discipline back into the market and go a long way to eliminating moral hazard.
Obama’s proposal took political courage because he is offending his Wall Street bosses. Financial stocks were down in today’s market. Obama should be applauded for this stand.
Tom Motherway
#1 by Tom Motherway on January 23, 2010 - 3:15 am
UPDATE: Politico calls Obama's sincerity on reform into question. Imagine that. Could it be that Wall Street and the Democrats are joined at the hip? See:http://www.politico.com/news/stories/0110/31855.h… tjm