"It is a fair bet that one of Barack Obama’s new-year’s resolutions was to rattle Wall Street. A week after hitting America’s largest financial firms with a “responsibility” fee, to recoup up to $120 billion in bail-out losses, on Thursday January 21st the president proposed dramatic new curbs on their activities. Keen to show progress in at least one part of his agenda, especially after an election in Massachusetts stripped the Democrats of their super-majority in the Senate and put health-care reform in doubt, Mr Obama touted the plan as a way to cut the bloated giants of finance down to size and constrain excessive risk-taking with customer deposits. “Never again will the American taxpayer be held hostage by a bank that is too big to fail”, he thundered.
The implausibility of that claim should not detract from the potential impact of the plan. Though not a full return to Glass-Steagall, the law that separated commercial banking and investment banking in the wake of the Great Depression (and was repealed in 1999), it is at least a return to its “spirit”, as one official put it. Reflecting the possible dent it could put in profitability, bank shares tumbled, pulling stockmarkets down sharply around the world."
Banks should not be able to invest with Federally backed deposits. They gamble in the market and we all lose. Taxpayers pick up the bill.
The global banking failure of 2008 was epic. A global failure? Think about that. How many other industries failed at the same time around the world?
Next up, getting rid of too big to fail. If the markets do really correct, they should fail.
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