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Bill Radke: President Obama has waded into the debate on financial reform legislation. Yesterday, he proposed that Congress stop the big banks from making the kind of high-risk trades that helped bring on the financial crisis. Marketplace’s Nancy Marshall Genzer joins us live, from Washington. Good morning.
Nancy Marshall Genzer: Good morning.
Radke: Nancy, when we say risky trades, what are we talking about?
Marshall Genzer: Bill we’re talking about a ban on what’s known as proprietary trading. That is, banks making trades on their own behalf.
Radke: And what is wrong with that?
Marshall Genzer: Well the White House says that could cause a conflict of interest that would affect a bank’s customers. Also, under Obama’s proposal, banks wouldn’t be able invest in hedge funds or private equity funds.
Radke: And how are banks reacting to this wing-clipping?
Marshall Genzer: They’re not happy, of course, Bill. Surprise surprise, they’re lobbying furiously against the Obama proposal. Some are threatening to move to other countries that don’t have these kinds of restrictions. Andrew Hilton is the director of the Center for the Study of Financial Innovation in London. He says U.S. banks might not have much more luck in Europe:
Andrew Hilton: The political environment in Europe for American banks is dire at the moment. If they come over here, they’re not going to be any more popular here than they are in New York. The environment here is going to be at least as hostile as it is in New York or California.
And Hilton says the feeling in Britain is that huge global banks are to blame for the financial crisis.
Radke: And what’s the feeling where you are in Washington?
Marshall Genzer: Well, Obama’s proposal is getting a very chilly reception on Capitol Hill. Senator Chris Dodd, the Democrat who chairs the Senate Banking Committee, says the White House plan is just a political ploy.
Radke: Interesting. Marketplace’s Nancy Marshall Genzer. Thank you.
Marshall Genzer: You’re welcome.
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