Obama Likely To Announce New Curbs On Size Of Banks: Reports

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In an effort to reduce risk taking, President Barack Obama is expected to announce Thursday new restrictions on the size of financial institutions, reports said. The president would reportedly hold a session with former Federal Reserve Governor Paul Volcker, who leads the Presidential Economic Recovery Advisory Board, at the White House, after which he would deliver public remarks on the revamp of financial regulations.

In June 2009, the president had proposed changes in regulations to fix the lapses in the financial system, which played a key role in pushing the nation into recession. Obama said in an interview with ABC News broadcast tonight, "We've got a financial regulatory system that is completely inadequate to control the excessive risks and irresponsible behavior of financial players all around the world."

Obama's proposal today is expected to reveal new curbs on the size of the country's largest financial institutions, to prevent them from posing a threat to the economy by becoming excessively large. They also aim at preventing banks from becoming large enough to distort normal competitive forces, the Wall Street Journal said.

Volcker submitted a report from the Group of Thirty about an year back, which stressed on separation between commercial banks and businesses engaged in speculative risk-taking. The WSJ report added that Obama is expected to endorse measures pushed by Volcker to place curbs on the proprietary trading done by commercial banks. This move will limit the way banks bet with their own capital. The goal is to prevent banks from using federally insured deposits to finance speculative activity.

Such a proposal could affect Bank of America Corp. (BAC), Wells Fargo & Co. (WFC) and J.P. Morgan Chase & Co. (JPM) the most as they control a large amount of U.S. deposits. Goldman Sachs (GS), Morgan Stanley (MS), and Citigroup Inc. (C ), which have a huge presence on Wall Street, also are likely to be impacted by such regulations.

In an effort to reduce risk taking, President Barack Obama is expected to announce Thursday new restrictions on the size of financial institutions, reports said. The president would reportedly hold a session with former Federal Reserve Governor Paul Volcker, who leads the Presidential Economic Recovery Advisory Board, at the White House, after which he would deliver public remarks on the revamp of financial regulations. (Market News Provided by RTTNews)