WASHINGTON, January 22, 2010 (AFP) – President Barack Obama unveiled plans Thursday to limit the size and scope of US banks and financial firms in a new offensive against Wall Street excesses laid bare by the financial crisis.
“Never again will the American taxpayer be held hostage by a bank that is too big to fail,” vowed Obama, flanked by former Federal Reserve chief Paul Volcker who advised the president on the rules.
The plans aim to limit “excessive” risk taking and to “protect” taxpayers by preventing banks or financial institutions from owning, investing in or sponsoring hedge fund or private equity funds.
They will effectively force financial firms to choose between proprietary activities — trading in stocks and sometimes risky financial instruments for their own benefit — and traditional activities, like making loans and collecting deposits.
The initiative, which must be approved by Congress, includes a new proposal to limit the consolidation of the finance sector, placing broader limits on “excessive growth of the market share of liabilities” at the largest financial firms.
Obama blamed banks for sparking the worst economic crisis since the Great Depression with “huge reckless risks in pursu