This is a good move. I feel a lot of resentment against these banks that put our economy on the brink of collapse and then reward their executives for getting taxpayer money.
The president, for the first time, will throw his weight behind an approach long championed by Paul A. Volcker, former chairman of the Federal Reserve and an adviser to the Obama administration. The proposal will put limits on bank size and prohibit commercial banks from trading for their own accounts — known as proprietary trading.
The White House intends to work closely with the House and Senate to include these proposals in whatever bill dealing with financial regulation finally emerges from Congress.
Mr. Volcker flew to Washington for the announcement on Thursday. His chief goal has been to prohibit proprietary trading of financial securities, including mortgage-backed securities, by commercial banks using deposits in their commercial banking sectors. Big losses in the trading of those securities precipitated the credit crisis in 2008 and the federal bailout.
We haven’t seen any details yet, but here is the outline of the proposal:
Now the concern is a new type of activity in which financial giants like Citigroup, Bank of America and JPMorgan Chase engage. They now operate on two fronts. On the one hand, they are commercial banks, taking deposits, making standard loans and managing the nation’s payment system. On the other hand, they trade securities for their own accounts, a hugely profitable endeavor. This proprietary trading, mainly in risky mortgage-backed securities, precipitated the credit crisis in 2008 and the federal bailout.
Mr. Volcker, chairman of the president’s Economic Recovery Advisory Board, a panel of outside advisers set up at the start of the Obama administration, has gradually lined up big-name support for restrictions on such trading.