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.