By Kevin Drawbaugh and Rachelle Younglai
WASHINGTON, Feb 2 (Reuters) – White House economic adviser Paul Volcker urged Congress on Tuesday to rein in risky investing by big banks to prevent them from becoming “too big to fail.”
The former Federal Reserve chairman — a sage of monetary policy and crusader for tighter regulation whose star is rising in the Obama administration,– faced questions from lawmakers about President Barack Obama’s latest proposals affecting big banks.
Obama stunned financial markets in late January by calling for new limits on banks’ ability to do proprietary trading, or buying and selling of investments for their own accounts unrelated to customers.
Since then analysts have speculated widely about exactly what sort of activities would be off-limits if Congress adds the proposal, formulated by Volcker, to a sweeping package of financial regulatory changes still being debated.
Some see the boundary between proprietary trading and market-making that helps customers as blurred, but Volcker said there was little reason for uncertainty.