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Obama to Propose Limits on Risks Taken by Banks

WASHINGTON — President Obama on Thursday will publicly propose giving bank regulators the power to limit the size of the nation’s largest banks and the scope of their risk-taking activities, an administration official said late Wednesday.

The president, for the first time, will throw his weight behind an approach long championed by Paul A. Volcker, former chairman of the Federal Reserve and an adviser to the Obama administration. The proposal will put limits on bank size and prohibit commercial banks from trading for their own accounts — known as proprietary trading.

The White House intends to work closely with the House and Senate to include these proposals in whatever bill dealing with financial regulation finally emerges from Congress.

Mr. Volcker flew to Washington for the announcement on Thursday. His 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.

The president will speak at an appearance on Thursday at the White House with Treasury Secretary Timothy F. Geithner, an administration official said, speaking on the condition of anonymity because the talks were private. It will come after a meeting with Mr. Volcker.

A similar discussion is percolating in Europe, led by Mervyn King, head of the Bank of England.

The president’s announcement comes as his popularity in public opinion polls is falling because of stubborn unemployment and the stagnant economy, and just days after he suffered a stinging loss when the Republicans won the Senate seat from Massachusetts.

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It is the Economy stupid!  And, the bailout of banks should have given a real indication on what is not working.

I hope they reinstitute Glass Steagall Act rules.