In public remarks Thursday, President Obama said he wants to give federal regulators the power to restrict the size of the nation's largest financial institutions and the scope of their risk-taking ventures, such as investing in hedge funds.
[IMAGE]The phrase that became vogue at the onset of the financial crisis when Washington was crafting its bailout policies ""too big to fail"" has become a sticky cliche begrudged by Main Street taxpayers and lawmakers alike.
The financial system has taken great strides from that edge of ruin that seemed so pervasive just a year ago, but President Barack Obama said, it is still operating under the exact same rules that led to its near collapse.
""My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform; and when I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low, and cannot refund taxpayers for the bailout"" the president said in a prepared statement. ""It is exactly this kind of irresponsibility that makes clear reform is necessary.""
The White House explained that the president's plan would strengthen the comprehensive financial reform package that is already moving through Congress and put an end
[COLUMN_BREAK]to two key bank cultures that contributed significantly to the financial crisis.
The proposal would limit the size of any one banking giant by closely regulating consolidation in the financial sector. The president is seeking to place broader limits on market shares of liabilities at the largest financial firms, in addition to existing caps on market shares of deposits.
Obama said he and his economic team will also work with Congress to ensure that no bank, or company that contains a bank, will own, invest in, or sponsor a hedge fund or a private equity fund. Banks will be prohibited from proprietary trading operations for their own profit that are unrelated to serving customers.
The president's announcement comes on the heels of his attack on big banks last week, where he called for a bailout tax to be imposed on all financial institutions with more than $50 billion in assets. Obama says it was the big banks that pushed the nation into its deepest recession since the 1930s, and it should be their responsibility to bankroll the rescue initiative. The tax could cost some of the largest lenders more than a billion dollars annually over at least the next 10 years.
Banking industry lobbyists are gearing up to fight both the bailout tax and the new proposals introduced Thursday.
One financial industry executive told the news site Politic.com, ""The administration's policy response isn't based on facts or logic, it's based on class warfare politics and fear. If enacted, theses proposals will undermine the effectiveness and competitiveness of the U.S. financial sector.""
But the president says he's ready for Wall Street's opposition. ""If these folks want a fight, it's a fight I'm willing to have,"" Obama told reporters Thursday. He warned the financial sector to ""work with us and not against us.""