Thursday, January 21, 2010

Here it comes

The anti-business Obama administration is expected soon to propose limits on how banks can run their business. The proposal is expected to include limits on the amount of risk banks can take on and also limit propietary trading.

This is huge and will affect Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co., Goldman Sachs, Morgan Stanley and Citigroup Inc. Placing limits on propietary trading will hurt banks like Citi, which despite its losses is still effective in this arena and traditionally has had an excellent track record at making money from these trading activities. This is not a way to help banks recover, but rather a way to show main street that Obama can tame Wall Street's bankers. It will only slow the recovery more.

"Mr. Obama is also expected to endorse, for the first time publicly, measures pushed by former Federal Reserve Chairman Paul Volcker, which would place restrictions on the proprietary trading done by commercial banks, essentially limiting the way banks bet with their own capital."

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