President Obama will announce today proposals to limit the size of U.S. banks as well as their risk taking, NYT is reporting.
He also will propose barring proprietary trading of financial securities by commercial banks.
This certainly explains Volcker's meeting at the White House. Volcker has been a long time critic of bank proprietary trading.
Of course, this is all more government intervention, when a free market solution is readily available. Simply pull the rug from all the guarantees that the government issues on deposits and other liabilities of banks, and those who put money with banks will pretty quickly decide to put their money with conservative banks rather with wild west banks who trade as though they were in Vegas backed up by Ben Bernanke.
This announcement does nothing but show the extent to which Obama is an interventionist thinker rather than a free market one. Further, with his ratings falling faster than Jay Leno's did at 10:00, Obama is attempting to tap into the populist rage, which, of course, was fueled in the first place by the pay outs made by Bush and Obama.
Last week, there was the bank fee tax, now this. It looks like Obama's plan for climbing in the polls is to crap on the big banks at least once a week.
Wenzel,
ReplyDeleteWhat is the substantiative difference between the Obama proposal, and Mish's recent (today) call for the separation of commercial and investment banking activities?
I argue there is none.
I agree Obama's moving in the wrong direction. But bank consolidation will continue and big banks will get bigger. They're just going to look less like Walter Wriston's vision of Citibank (which was never achieved) and more like BOJ. Its not a pretty picture.
ReplyDeleteI agree with Taylor and his blog is a great read on this issue. Mish is dead wrong. The most important action needed is to stop the banks from socializing their risk (which they do thru government guarantees). Eliminate the government guarantees and there wouldn't be a financial crisis.
ReplyDelete