At long last, Barack Obama has proposed major reforms of the banking industry that have real teeth - By severely restricting the kind of speculation that banks can engage in and increasing tightening the cap on the liabilities that a bank can hold.
The proposed reform goes far beyond anything the administration has ever proposed before, taking advice from Paul Volcker in terms of what sort of activities banks should not be engaged in. Bank lobbyists and consultants have already begun to blast Obama.
We need to fight for this proposal. More below.
The New York Times notes the significance of Obama's Proposal:
...the president, for the first time, threw his weight behind an approach long championed by Mr. Volcker, who flew to Washington for the announcement. Mr. Volcker’s chief goal has been to prohibit proprietary trading of financial securities, including mortgage-backed securities, by commercial banks using deposits in their commercial banking sectors. Big losses in the trading of those securities precipitated the credit crisis in 2008 and the federal bailout.
In addition to preventing the kind of speculation that did in banks like Citibank, the proposal further restricts the amount of liabilities a bank can have by including liabilities other than deposits in the existing cap.
Bank lobbyists, the corporate media, and Republicans will clearly provide a stiff headwind to this kind of real reform. Shortly before the proposal came out, Reuters printed a piece that could have been written word-for-word by bank lobbyists titled "Obama attacks on banks fall flat but may persist" which dismissed the president's criticisms of banks as desperate politicking.
It's critical that we stand up, call our congressmen, and fight for this proposal. Given his history, we don't know exactly how hard Obama will or won't fight for the proposal, and those lobbyists have their claws in a lot of Democratic senators and representatives. These lobbyists have already begun to blast Obama's proposals. We need to let them know this is indeed change we can believe in.
Yesterday, I wrote a diary blasting President Obama's timidity with respect to HC reform following the Massachusetts special election, but it's time to give credit where credit is due. And it's time for us to stand up for the first real proposal we've had that restricts banks to their proper role and helps ensure that their part in the financial crisis never happens again.