Obama Rips Banks, Proposes Ban On Proprietary Trading
President Obama stepped up the heat on big banks Thursday, saying he would fight to ensure that their "binge of irresponsibility" never happens again.
He proposed limits on banks' size and proprietary trading and said he would work to "rein in excessive abuse that brought down our system."
He said banks "backed by the American people" shouldn't be allowed to own or sponsor hedge funds and private equity funds for their own profit, while putting customers at risk.
About the new proposed rule that'd limit the proprietary trading of banks, the head of the New York Stock Exchange, Duncan Niederaurer said,
....implementation is challenging. As a student of the market I can tell you that it all blurs together...
But he's also a *Former Managing Director of Goldman Sachs*!!!
Supposedly, Goldman trades 20 times as many shares for their own account than they do for their customers.
I have no problem with Goldman gambling its own money; but they shouldn't be brokering trades as well. Doing both entails almost the biggest conflict of interest imaginable.
Look, I'm against most regulation of markets. The fund managers (and their investors) who willingly give their trades to Goldman and get ripped off....they deserve the bad fills and whatnot.
But within a regulated market, it's not hard at all to segregate trading and brokering. Any and all arguments against doing so are specious and fall flat.
I got sidetracked here.
Look, it's not *proprietary trading* that got all these banks in trouble.
It was the gambling implicit in no-money-down, high-priced mortgages in residential AND commercial real estate. And credit cards too!
So yes, FDIC-insured banks probably shouldn't be rolling the dice like Sol.
But selling 20 or 50-1 leveraged homes to José Sixpack has proven far riskier.
Getting back to Obama for a minute. He's right to be slamming the banks - even it he's clueless at the to extent of Big Government culpability in their behavior. They were born of leverage for crying out loud, with their fractional-reserve sanction, FDIC insurance, and whatnot.
You see while Obama inveighs against banker's "binge of irresponsibility"....
Not only will this anti-trading rhetoric do nothing to lower the risk profile of Bank of America, JP Morgan, Wells Fargo, Citigroup, et al,....we're still left with very little to combat the *binge of irresponsibility* from politicians. Consider the hypocritical irony of Barney Frank, serial apologist for Fannie, Freddie, and subprime lending, up there next to the podium. What a farce!