Financial Regulatory Forum

By Keith Weir and Crispian Balmer

LONDON/PARIS, Jan 22 (Reuters) – Major European economies offered support on Friday for U.S. President Barack Obama’s plan to limit banks’ size and trading activities but indicated they had no plans to follow suit.

Obama’s dramatic proposals could rewrite the world financial order but experts said they were light on detail and could cloud the global approach fostered by the Group of 20 nations.

The European Union will not imitate Obama’s plan, because it aims to reduce risk in the sector through other means, an EU source said on Friday.

“Look, we understand the U.S. position and we understand his reasons. But I can’t see the EU going down this route,” the source, who is close to EU financial policymaking, told Reuters.

“The U.S. finds itself a little behind us on this. The Obama plan is not fit for the purpose in the EU.”

By Huw Jones

LONDON, Jan 22 (Reuters) – U.S. President Barack Obama’s plans to rein in banks puts Europe on the back foot and creates confusion over global efforts to coordinate financial regulation, lawyer and regulatory officials said on Friday.

Obama proposed on Thursday to curb banks’ size and risk-taking, sending shares in major institutions down.

Senior officials and lawmakers involved in regulatory policymaking at a global and European level said they had been kept in the dark about the plans.

Jan 22 (Reuters) – Here is some reaction from around the world to U.S. President Barack Obama’s proposals to limit financial risk taking.

EUROPEAN GOVERNMENTS

GERMAN FINANCE MINISTRY SPOKESMAN MICHAEL OFFER:

“We see the new proposals as a helpful suggestion for the continuing discussions on an international level. And we’re obviously aiming to find a solution to the problem of the ‘too big to fail’ issue.”

“In America, the polarity between Wall Street and Main Street is more marked than with us. But we’re open to this and ready to consider them in the framework of the international discussions.”

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By James Pethokoukis

WASHINGTON, Jan 21 (Reuters Breakingviews) – Wall Street has reason to fear President Obama’s latest bank crackdown plan. The surprise proposal, though fuzzy, suggests that the White House sees bank-bashing as a way to stop the Democrats’ political rot. In an election year, the Republicans might not save the bankers, either.

Following the Democrats’ traumatic defeat in the Massachusetts U.S. Senate race, politics has come to the fore. The fingerprints of the two primary architects of Obamanomics to date — economic adviser Lawrence Summers and Treasury Secretary Timothy Geithner — are noticeably absent from the plan to limit the size and trading activities of banks. The likely ghostwriters are Rahm Emanuel, the White House chief of staff, and political advisor David Axelrod.

NEW YORK, Jan 21 (Reuters) – U.S. President Barack Obama is looking at limiting risk-taking at banks.

But his proposals on Thursday were tantalizingly vague. He said he wanted to limit the amount of borrowing that banks can do relative to their peers and limit their trading activities to buying and selling securities to customers.

But it is not clear whether relative borrowing limits will be low enough to force banks to reduce their debt. And the line between buying and selling securities on behalf of customers, and doing so on behalf of the bank, can be blurry.

By Kevin Drawbaugh

WASHINGTON, Jan 21 (Reuters) – The beat walked by a proposed super-cop for banks is shrinking in the latest financial regulation reforms being debated in the U.S. Senate, said sources familiar with committee negotiations on Thursday.

Senate Banking Committee Chairman Christopher Dodd has called for the formation of a Financial Institutions Regulatory Administration (FIRA) to replace a current patchwork system that includes four bank supervisors in Washington.

But Dodd and other lawmakers, seeking compromise on this and other issues, are revising the FIRA proposal, said sources who asked not to be named because negotiations continue.

By Jeff Mason and Kevin Drawbaugh

WASHINGTON, Jan 21 (Reuters) – U.S. President Barack Obama threatened to fight Wall Street banks on Thursday with new proposals to limit financial risk taking, sending stocks and the dollar tumbling.

Obama, a Democrat who is struggling to advance his agenda after a key election loss this week, laid out rules to restrict some banks’ most lucrative operations, which he blamed for helping to cause the financial crisis.

“If these folks want a fight, it’s a fight I’m ready to have,” Obama told reporters at the White House, flanked by his top economic advisers and lawmakers.

By Jeff Mason and Kevin Drawbaugh

WASHINGTON, Jan 21 (Reuters) – U.S. President Barack Obama proposed stricter limits on financial risk-taking on Thursday in a new populist-tinged move that sent bank shares lower and aimed to shore up his own political base.

Obama proposed new rules to prevent banks or financial institutions that own banks from owning, investing in or sponsoring a hedge fund or private equity fund. The rules would also bar institutions from proprietary trading operations, unrelated to serving customers, for their own profit.

Proprietary trading refers to a firm making bets on financial markets with its own money, rather than executing a trade for a client. These expert trading operations, which can bet on stocks and other financial instruments to rise or fall, have been enormously profitable for the banks but also increase market volatility.

By Alister Bull and Karey Wutkowski

WASHINGTON, Jan 20 (Reuters) – President Barack Obama, reeling from an election defeat in the U.S. Senate, will propose stricter limits on financial risk-taking on Thursday in a move that may recall Depression-era curbs on banks.

The president will announce a series of measures to cut down on excessive risk-taking as part of a revamp of the country’s financial regulatory system, a senior Obama official said on Wednesday.

The move could also help the White House tap into public rage over Wall Street excess after Obama’s Democratic Party was rebuffed by voters in Massachusetts, who elected Republican Scott Brown to the U.S. senate.

By Karey Wutkowski

WASHINGTON, Jan 20 (Reuters) – The Obama administration’s Wall Street bashing fell flat among voters in Massachusetts, but that doesn’t mean Democrats have ended their anti-bank rhetoric.

Major U.S. banks, which returned to sizable profits and lavish bonuses just months after taxpayers bailed out the financial system, represent a convenient target for politicians to score points with voters.

“It is too easy and ripe and necessary a target for the Obama White House because they’ve been labeled as protecting the banks … during the whole first year of their administration,” said Ethan Siegal, an analyst with the Washington Exchange, a private firms that tracks Congress and the White House for institutional investors.