Obama to regulate big bank trading

John Dimsdale Jan 21, 2010
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Obama to regulate big bank trading

John Dimsdale Jan 21, 2010
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TEXT OF INTERVIEW

Steve Chiotakis: A little later this morning, President Obama will announce a plan to trim the size of big banks in this country. The ones that proved to be too big to fail during last year’s financial crisis. Marketplace’s Washington Bureau Chief John Dimsdale joins us from the nation’s capitol with the latest. Good morning John.

John Dimsdale: Good morning, Steve.

Chiotakis: What does the president want to do?

Dimsdale: He’s going to ask Congress to give government regulators more powers to limit the financial trading and investing that banks like Citigroup and Goldman Sachs have engaged in ever since those firewalls between those speculative activities and regular banking functions were dropped in the 1990s. For example, banks would no longer be allowed to wheel and deal in mortgage-backed securities — those are the thing that got them in so much trouble when housing prices tumbled in 2008.

Chiotakis: All right John, so what would this mean for the banks? I mean how are they likely to react?

Dimsdale: Well, depending on what exactly the president proposes — and we don’t yet know all the details — big banks have made huge profits off the buying and selling and insuring of these speculative investments, so they’re not going to like it. Edward Haddis with the Reuters Breaking Views says U.S. banks are likely to say government limits will make them less globally competitive.

Edward Haddis: If indeed the U.S. banks have tighter regulatory restraints than the European and other rivals that could be a disadvantage. But it should be pointed out that U.S. investment banks did fine in the old days against their European rivals, which had lighter restrictions in terms of mixing banking and investment banking.

Haddis points out that other industrialized countries in Europe and Asia are also thinking of reining in bank’s more speculative activities in the wake of the financial crisis.

Chiotakis: Marketplace’s John Dimsdale reporting from Washington for us. John, thanks.

Dimsdale: You’re welcome.

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