Market

Jan. 21 (Bloomberg) — President Barack Obama, tapping into voter anger over bank bailouts, called for limiting the size and trading activities of financial institutions as a way to reduce risk-taking and prevent another financial crisis.

The proposals, to be added to an overhaul of regulations being considered by Congress, would prohibit banks from running proprietary trading operations solely for their own profit and sponsoring hedge funds and private equity funds. He also proposes expanding a 10 percent market-share cap on deposits to include other liabilities such as non-deposit funding to restrict growth and consolidation.

Obama made the statement at the White House after meeting with former Federal Reserve Chairman Paul Volcker, who has been an advocate of taking such steps.

The proposals could affect trading at some of the nations largest banks, including New York-based Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co., said Frederic Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. Banks conduct proprietary trading for their own benefit, not for that of their clients.

JPMorgan, Morgan Stanley and Bank of America Corp. tumbled more than 5 percent in New York trading, leading the S&P 500 Financials Index down as much as 3.3 percent, its biggest decline since October. Goldman and Citigroup Inc. dropped more than 4 percent.

Congressional Approval
The plan is subject to approval by Congress, where the presidents earlier regulatory proposal has hit resistance from some lawmakers and opposition from financial firms. Financial industry executives, lobbyists and analysts were critical of the proposal.

http://bloomberg.com/apps/news?pid=20601087&sid=an1RUYC9UqAY&pos=1

Video Copyright MSNBC 2010

Obama proposes proposal bank limitations limits size hedge funds derivatives JP Morgan Morgan Stanley Bank of America Goldman Sachs Paul Volcker

Duration : 0:7:44

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