President Obama today, January 21st, joined Paul Volcker, former chairman of the Federal Reserve; Bill Donaldson, former chairman of the Securities and Exchange Commission; Congressman Barney Frank, House Financial Services Chairman; Senator Chris Dodd, Chairman of the Banking Committee and the President’s economic team, called for new restrictions on the size and scope of banks and other financial institutions to rein in excessive risk taking and to protect taxpayers.
“While the financial system is far stronger today than it was a year one year ago, it is still operating under the exact same rules that led to its near collapse,” said President Barack Obama. “My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform; and when I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low, and cannot refund taxpayers for the bailout. It is exactly this kind of irresponsibility that makes clear reform is necessary.”
The president therefore proposed the “Volker Rule” named after former Federal Reserve Chaiman, Paul Volcker, wherein banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers.
Obama also announced a new proposal to limit the consolidation of the financial sector. The proposal will place broader limits on the excessive growth of the market share of liabilities at the largest financial firms, to supplement existing caps on the market share of deposits.
The president said that if banks wanted to fight against the new measures, it’s a fight that he is ready to have. Obama said he is resolute in pressing ahead with these proposals, given that banks are returning to their old practices.
The proposals announced today, Obama said, will help put an end to the risky practices that contributed significantly to the financial crisis.
