President Obama will offer new proposals to limit financial institutions’ size and trading activities, which effect some of the nation’s largest banks including JP Morgan Chase (NYSE: JPM), Citigroup (NYSE: C), Bank of America (NYSE: BAC) , Goldman Sachs (NYSE: GS) and others as a way to reduce risks associated with banks that are “too big to fail”, said an administration official.
Obama is planning on announcing the new rules in Washington later this morning after a meeting with Former Federal Reserve Chairman Paul Volcker at the White House. The proposals will be part of a larger overhaul of banking regulations and will specifically address firms’ proprietary trading, according to the anonymous administration official.
Many believe that Obama is renewing his focus on economic issues, tapping into anger on behalf of voters about the struggling economy as unemployment rates remain above 10% and with a federal deficit of $1.4 trillion for 2009.
One of the proposals key restrictions will be related to the banks’ proprietary trading, which is generally conducted for their own benefits rather than their clients. This business is extremely profitable for banks that have developed superior trading platforms.
Last week, President Obama announced a new plan to impose fees on as many as 50 financial companies to recover losses from the federal government’s Troubled Asset Relief Program. It would be imposed starting on June 30th on companies including AIG, Citigroup and Bank of America.
During an interview on ABC News earlier in the week, President Obama said that “We’ve got a financial regulatory system that is completely inadequate to control the excessive risks and irresponsible behavior of financial players all around the world.”
