Obama sends bank reform proposals to Congress

The Financial Times reports that the Obama administration has sent its Volcker Rule bank reform proposals to the US Congress.  The report states that the summary text limits a bank's overall liabilities in the US financial system to 10%; a new element to the proposal.  The text also provides some more detail about which bank trading activities will be permitted.


This is an important step - it's unfortunate that there has been so much rush to oppose the Volcker Rule.  Again and again we hear statements that what's needed is better regulation and that bank reform would be too complicated (we don't hear this from the Bank of England or the Financial Services Authority however).  And we hear the old chestnut that limiting the size of banks is pointless.


Once again bank reformers have to repeat: we need both better regulation and structural reform.  It's not so much the size of a bank as its importance to the whole financial system that matters.  Better regulation is not sufficient.  Banks can be separated; it was done after the 1929 stock market crash.


The question is whether global political leaders have courage in the face of bank lobbying and the will to use their political power.


Stephen Beer, 03/03/2010

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