Obama's 'new Glass-Steagall Act' will prevent banks with customer deposits taking risky investment betsExtract from the Guardian (UK), 21 January 2010
by Jill Treanor
President Barack Obama today declared his intent to take on Wall Street by announcing plans for stringent rules on the banking sector that prompted comparisons with the draconian regulations introduced after the Great Depression.
In the boldest move taken by any government around the world to respond to the financial crisis, Obama told banks they would no longer be able to take risky bets with their own capital to make money on the financial markets.
Banks which take deposits will not be allowed to use their own money to take bets on markets, run hedge funds or make private equity investments through what he called the "Volcker rule" after former Federal Reserve chairman Paul Volcker.
He also wants to prevent further consolidation of the financial system in the US and will ban takeovers and mergers among American firms in the sector.
Obama said the new proposals would keep taxpayers from being "held hostage" by banks that have become "too big to fail" and that pose a risk to the entire financial system.
Wall Street was nervous ahead of the announcement, with the Dow Jones Industrial Average down more than 160 points before he spoke and then falling a further 40 points once he had finished. The FTSE 100 index in London fell sharply in afternoon trading as the markets feared the impact on UK banks such as Barclays and RBS.
"We simply cannot return to business as usual," said Obama.
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