Big banks are today's designated villains, widely blamed for creating
the financial crisis and criticized for sopping up government bailout
money and then indulging in a new orgy of extravagant bonuses. To
prevent the banks from acting carelessly and taking excessive risk,
President Obama has proposed restricting bank activities, like
prohibiting them from trading for themselves and limiting the size of
liabilities.
These proposals, made late in January of this year, come on top of
others: a $90 billion tax over 10 years on the 50 largest banks to pay
back bailout money; efforts to assure executive compensation doesn't
encourage excessive risk taking; and a proposal for a new consumer
protection agency, among others.
"While the financial system is far stronger today than it was one
year ago, it is still operating under the exact same rules that led to
its near collapse," Obama said in announcing his proposals. He went on
to tap into populist, anti-bank sentiment, noting the banks are making
record profits while refusing to lend to small businesses, that they are
charging high credit card rates and failing to "refund taxpayers for
the bailout." He added that it was "exactly this kind of
irresponsibility that makes clear reform is necessary."
But would the latest proposals, including the "Volcker Rule" named
for their champion, Paul A. Volcker -- the former Federal Reserve
chairman who is one of Obama's chief economic advisors -- really get at
the causes of the recent financial crisis? The Volcker Rule, including
the proprietary-trading restriction, has many high-profile supporters.
But we at Blackhawk think it misses the mark by focusing attention on
the now-blurred distinction between commercial banks, which take
deposits, and investment banks, which trade on their own accounts and
underwrite stock and bond issues. .................. http://goo.gl/Uxc1T
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