Financial Regulatory Forum

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.

The White House has also said it wishes to prevent banks from investing in and sponsoring hedge funds and private equity firms, but it is not clear if banks will also be prevented from financing these clients, which can itself be risky.

Wall Street firms are likely to fight any efforts at reform, and President Obama has lost some political capital after a bruising effort to pass health care reform, and losing a Senate seat in a special election in Massachusetts.

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.