News

The Obama Proposal

barackobama.jpgGood timing for Goldman to hold its conference call early, ’cause no one is talking about them anymore. We knew it was coming, but Obama’s new restrictions on banks go beyond what was expected, sending bank stocks down. Taking the fight to another level, (and trust him, he will fight) Obama described proposed reforms that would limit the size and scope of banks.

My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform. So if these folks want a fight, it’s a fight I’m ready to have.

The most stringent aspect -and what, unsurprisingly, is making Wall Street crazy angry- is the banning of prop desks at banks. The so-called Volcker Rule (“after this tall guy behind me”) will no longer allow banks to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations.

We cannot accept a system in which shareholders make money on these operations if the bank wins, but taxpayers foot the bill if the bank loses.

While this ban, combined with the proposed bank tax will cost banks big bucks, could it be a boon for hedge fund?
The second proposed reform (and that one’s for you, Too Big To Fail) would limit the consolidation of the financial sector. To do so, Obama proposes to place “broader limits on the excessive growth of the market share of liabilities at the largest financial firms, to supplement existing caps on the market share of deposits.”

The American people will not be served by a financial system that comprises just a few massive firms. Never again will the American taxpayer be held hostage by a bank that is too big to fail.

Yeah, yeah, people are angry. The banks are angry, the government is angry, Warren B and good ole’ Ace are cranky. It’s getting nasty out there. Blame it on Massachusetts. Or go Roubini-style and blame it on the Chinese.
Text of Obama’s speech [Reuters]
White House statement [White House]

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112 Responses to “The Obama Proposal”

  1. guest says:

    First person to come up with a definition of prop trading that a) allows banks to do normal bank things and b) actually prevents banks from trading prop gets a cookie

  2. guest says:

    [a bunch of expletives and epithets]

  3. guest says:

    How would you distinguish between a hedge and a prop trade? Does every position have to be approved by a regulator?

  4. InfiniteGuest says:

    Talk is cheap.

  5. guest says:

    to all my fellow wallstreeters who voted for this clown, i reiterate my "i told you so" this man is a celeb. not a politician or a businessman.

  6. guest says:

    Yael יעל—Mountain Goat, literally Ibex
    –a man who likes goats and can find stuff on Wikipedia

  7. guest says:

    Obama is clearly not too big to fail

  8. guest says:

    It's a good thing GS and MS aren't banks…oh wait.

  9. guest says:

    Who needs "Market Makers" anyway? Lets just get rid of the whole system, and go back to bartering goats and chickens.

  10. guest says:

    I trust Obama. He is very smart. He was a lawyer at a big firm.

  11. guest says:

    Good thing SCOTUS just struck down McCain-Feingold today. Who's got your campaign cash now, Kenya?

  12. guest says:

    Carter Redux. He is getting 900 year old Volks out of the old folks home just to maximize the parallels.

  13. guest says:

    Or we could let insolvent institutions fail and have their failure handles by a well-developed set of laws. We could call the laws the "bankruptcy code" or something like that.
    Also, if I'm not a bank holding company with access to the discount window, call me Flair Kearns or Beryl Pinch, and I'm cranking out MBS for re-sale like there's no tomorrow until tomorrow comes and no one wants to buy MBS any more and so I have to keep it on my books. Is eating my own shit "prop" trading, or customer facilitation? And, in any event, since I don't have access to the discount window as non-BHC, does this law even affect me?

  14. guest says:

    @10
    Terrific idea- that system works wonderfully for us
    -Afghanistan

  15. guest says:

    I will piss in your mouth and call you Crayola, until you love me!

  16. Pfluger the Barbaria says:

    I will continue to fuck you until the people love me again.
    – The Kenyan

  17. Effective Date says:

    LEAVE WALL STREET ALONE!! *SOB*

  18. guest says:

    CFA>MBA>Houseplant>Obama

  19. guest says:

    3, 10, and 17… exactly

  20. guest says:

    @17 bankruptcy=opportunity

  21. guest says:

    Obama suck it!
    Wall Street

  22. guest says:

    This is going to be so awesome
    -SAC

  23. guest says:

    @ 2/17
    This is fairly simple to implement. It's just a (prohibitive) VaR tax.
    @ 1. Indeed.
    @ 12. The money/ time you spent to get your CFA/ MBA was wasted. I suggest you run for office.

  24. EvilBuzzard says:

    For all the people who thought Wall Street could just feed money to this guy and buy him off…Who's your Daddy now?

  25. guest says:

    If you cannot come up with a better idea just f*ck off!… There is no reason why GS/MS or JPM (-chase part) need any access to the fed window. If you guys are that good at prop then why dont you spin yourself as a hedge fund and pay yourself even more? Prop trading is clear enough that banks have 'prop' desks but not enough to stop it! Ask any guy from s&t at BB they will come up with 100s of reasons why he is a prop trader vs other guy is not!!! WTF?

  26. guest says:

    How will taxpayers be forced to bail out failing prop desks if he's trying to impose consolidation limits to prevent banks from being TBTF in the first place?!?!

  27. Investorcluzo says:

    ok, I'm going to start working on the "second contract with america." barry, it was great that you got the job and put the issue of diversity on the map. unfortunately, you drank the kool-aid and went off the reservation. with this second contract, we'll make sure you're one and done…who's with me?

  28. NakedShort says:

    Dear Barry,
    No one gives a fuck about healthcare, bailouts, banks, mortgage relief, ect. We are only redirecting our anger because 10% of us can't find work and roughly another 10% to 15% of us are under employed or have stopped looking for work all together. Lock yourself in your office with various business leaders, bankers and economists for months on end if need be and find a targeted way to get us back to work.
    -The American People

  29. guest says:

    @32, as has been pointed out, thanks to the Supreme Court today, the ability of Wall Street to buy this guy off (or rather his Congressional support) has just gone from "$2000 per head" to "fucking unlimited"
    So that's good news.
    @33, this may be true, but what if you still have to convince some pederast in D.C. to agree with you?

  30. mrpink says:

    @NS- FTW
    -mrp

  31. guest says:

    @36, you're putting a contract on his head? Dude, that's going too far.

  32. EvilBuzzard says:

    @38 – And the prices of those purchases will inflate accordingly…

  33. guest says:

    @35, at least we agree on the houseplant>obama part of the equation. CFA is still > MBA.
    Looks like all banks will be zombie shells of their former selves soon enough. Why wouldn't you take yourself private with these regulations in place?

  34. Investorcluzo says:

    @40 – easy guy, black on black crime went out in the 80's…

  35. Pfluger the Barbaria says:

    @37/NS
    Haven't you read my and Joey's "plan." I have it on my blackberry, and here are some key elements:
    • Invest In A Clean Energy Economy And Create 5 Million New Green Jobs: Obama and Biden will invest $150 billion over 10 years to advance the next generation of biofuels and fuel infrastructure, accelerate the commercialization of plug-in hybrids, promote development of commercial scale renewable energy, invest in low emissions coal plants, and begin transition to a new digital electricity grid. The plan will also invest in America's highly-skilled manufacturing workforce and manufacturing centers to ensure that American workers have the skills and tools they need to pioneer the first wave of green technologies that will be in high demand throughout the world.
    Labor
    Obama and Biden will strengthen the ability of workers to organize unions. He will fight for passage of the Employee Free Choice Act. Obama and Biden will ensure that his labor appointees support workers' rights and will work to ban the permanent replacement of striking workers. Obama and Biden will also increase the minimum wage and index it to inflation to ensure it rises every year.
    • Ensure Freedom to Unionize: Obama and Biden believe that workers should have the freedom to choose whether to join a union without harassment or intimidation from their employers. Obama cosponsored and is strong advocate for the Employee Free Choice Act, a bipartisan effort to assure that workers can exercise their right to organize. He will continue to fight for EFCA's passage and sign it into law.
    • Fight Attacks on Workers' Right to Organize: Obama has fought the Bush National Labor Relations Board (NLRB) efforts to strip workers of their right to organize. He is a cosponsor of legislation to overturn the NLRB's "Kentucky River" decisions classifying hundreds of thousands of nurses, construction, and professional workers as "supervisors" who are not protected by federal labor laws.

  36. guest says:

    Last year all the banks wanted be cool and sent millions for this guy's campaign and now they see what shit they get.
    "Fellow jews, we shouldn't have trused an Afroamerican."
    LB

  37. guest says:

    @37 Stop making sense
    Regards,
    Talking Heads

  38. guest says:

    @46 just made me spit my whiskey on the keyboard

  39. guest says:

    @48 = Ken Lewis

  40. NakedShort says:

    @37/pfluger/Joey/Barry
    Interesting ideas that you guys have. Personally I think I would rather my borrowed future tax dollars be spent paying people that are unemployed to dig holes in the middle of Texas and fill them back up again.
    -The American People that currently are employed

  41. Anal_yst says:

    So if I'm following Obama/Volks, they're effectively re-instating Glass-Steagall (or at least trying to?)

  42. guest says:

    Lets sent Obama to the Arnold Classics and bulk up his skinny body a bit.
    If at least this idea had a bit more meat.
    AS

  43. guest says:

    @50 Unfair comparison. When you dig holes in the ground in the middle of Texas, valuable shit comes out of the hole.

  44. EvilBuzzard says:

    According to John Carney, the banks already know how to beat this rap.
    http://www.businessinsider.com/big-banks-have-alr

  45. mrpink says:

    Anal_yst-
    A BHO'fied version of it, seems to me.
    -mrp

  46. guest says:

    @Pluger, those are all great ideas…for me to poop on!!
    (RIP Triumph and M. Bear)

  47. guest says:

    I blame all of you liberals on Wall Street for putting this Marxist in office. You wanted Hope and Change…well, you've got it.

  48. Pfluger the Barbaria says:

    @48/NS.
    These are NOT merely "ideas!!!"
    These are "Plans," NS, Plans!!! I have many Plans. Joey. Timmy and I have the situation well in hand.
    – The Kenyan

  49. guest says:

    Obama has been toasted Brown. @7 is right, BO is a one-termer. He never should have run or been elected, to begin with. It's amazing people didn't get his narcissicism and inexperience in 2009.

  50. trojan says:

    rabble rabble rabble

  51. merkin capital partn says:

    We all continue to avoid the question that has plagued the nation since Barry's election: Why are his lips blue?

  52. Ben_H says:

    "That's not a proprietary position, Mr. Regulator. I have that $1bb face in Smegcorp 10% '2020 cuz I need inventory to accomodate customer flow!"

  53. guest says:

    i think we should audit the pay of our congressmen and senators, i believe they voted themselves raises recently. They clearly haven't done a good job. Let's cut their pay. I believe they get some form of payment for life……..?

  54. guest says:

    Obama self-rated himself a B+ for the first year… when he spent over $200MM in campaign money
    I can count the number of B+'s I got from Princeton with my dick
    real smart ass hole

  55. guest says:

    He really should not have listened to Patrick Chewing on this one.
    Rockso

  56. guest says:

    People, settle down…. This plan has zero chance of passing. Dodd will never back anything close to this nonsense especially since he's getting ready to ring the cash register himself. Schumer would be committing suicide to back it. Volcker is totally powerless and Barry will be the assistant g.c. a the the NBA office in 3 years.
    Now go out and enjoy yourselves tonight.

  57. guest says:

    @63, ROR!

  58. guest says:

    @62 Im guessing you were at Princeton before grade inflation policy was brought in. B+ became a fact of life after that.
    P'07

  59. guest says:

    @66-
    there was no "grade inflation" "policy", you knob.
    P'97

  60. guest says:

    What great irony that a bunch of asses at Goldman donated to the enemy and now they are getting fucked over by the same guy.
    to all the wall streeters who donated to this chump, I told you so you stupid fuckers

  61. guest says:

    I don't blame it on Mass or China..i say …. blame it on the aaaaaalcohol!
    http://www.youtube.com/watch?v=rfjtpp90lu8

  62. guest says:

    Will front-running still be considered standard client service?
    -Curious on Broad Street

  63. guest says:

    bring back George Bush.

  64. guest says:

    DERR TERK ER JERBS!
    DERR BRERK ER JERS!

  65. guest says:

    What a prick. Funny how all his fluffers have disappeared from the comments section. Thanks a bunch for electing this guy, assholes.

  66. guest says:

    I don't think so.

  67. Joe Mac says:

    I with you Cluz….
    Meanwhile @64 FTMFW

  68. guest says:

    @73 that is funny. Where did all you apologists go? out celebrating victory somewhere?

  69. guest says:

    Bankers will weasel out of the bank rules by promoting a public option in healthcare. Obama is a genius!

  70. guest says:

    @76, apologizing for what? Fuck you, retarded kid-toucher. God I miss Bush.

  71. guest says:

    The current shareholder value of the big investment banks is a gift from the us tax payer. When bankers repay that, they deserve their bonuses.

  72. guest says:

    @80 O RLY?

  73. guest says:

    Brown in Mass was the best thing that happened to the Libtards. Unfortunately, now they know the score and will really come out fighting. Hang on to your ass.

  74. guest says:

    @79 FYI an Obama "apologist" is someone who defends him. The commentariat (that would be all these people posting comments here) is attacking him, but nobody seems to be commenting in his defense.
    I hope this helps.
    -76

  75. guest says:

    I'd rather have Obama running the country than some right wing Jesus freak. News flash America, religion is made up.

  76. guest says:

    @84 Totally a separate issue, but I with you 100%

  77. guest says:

    84=apologist. examine your motives.

  78. guest says:

    WHERE AM I GOING AND WHY AM I IN THIS HAND BASKET?!!?!?!?!?!

  79. guest says:

    84… I believe the big O regularly attends services. So, I will take the white Jesus freak, thank you very much.
    Motives examined.

  80. guest says:

    A guy who hadn't a fucking clue presided us into this mess, and a guy who hasn't a fucking clue is now going to dick around for three more years and that's it. After that is anybody's guess

  81. guest says:

    Both parties suck hard. Corporations run this country. Americans are idiots.

  82. guest says:

    Ok here's the fix…you take away all prop trading from banks, require them to provide mortgages, but forbid them from making any kind of investment to hedge the risk on their books. You know what, scratch that, let's just make the entire banking industry run by "The State". That way the government (which NEVER has any corruption or manipulation) can run all of our finances at 1/8th the salary cost. We can farm out everything to the lowest bidder, it'll be great. Then, when you socialize healthcare we can use the savings to pay for it. You know what, since we're already on a roll Russia had a great idea with that whole communism thing…they had a guy, Marx or something, we can use his ideas and sollve all of our problems. Who needs freedom or capitalism or any of that bullshit.

  83. trojan says:

    @72
    you made my day

  84. guest says:

    The man is screwed and he knows it. He lives and dies by unemployment, and we all know the state of things there. This is just another ploy to direct the rage at something other than the government. Not gonna work.
    He is out of bullets and has decided its better to shoot blanks that stand there and do nothing.
    Do you think anyone without a job is going to care if he eliminates TBTF? I don't. In fact, my chance of ever finding a job is is very much tied to the success of big banks.

  85. Horseicorn says:

    Great explanation of where Obama and his people devised this plan
    http://tinyurl.com/yef8d38

  86. guest says:

    @ 96 ….

  87. guest says:

    This is George W. Bush's fault. He didn't break up the financial firms in time so Obama has to do it. Now you greedy wall street folks are taking it all out on Obama when all he is doing is the saving the world.
    HuffingtonPost Devotee

  88. guest says:

    I worked on a proprietary trading desk at an investment bank until our group was cut in 2008. I can understand Obama's point of view. Access to taxpayer funds, Fed discount window and an implicit gov't backstop is not compatible with speculative positions on global rates, currencies and EM debt, for example.

  89. guest says:

    IOO
    MBA>CFA.

  90. guest says:

    I laughed 87.

  91. guest says:

    BARACK OBAMA IS THE SECOND COMING OF OUR LORD AND SAVIOR JESUS CHRIST.

  92. DIV01 says:

    @99
    These clowns don't understand what a joke the biz has become. Taxpayers backstop has included MORE than just the direct money handed to banks. These fuckers should have been liquidated and still should. Mark your shit to market, you are all insolvent. Take risks with your own money or investor money and not my fucking money.
    I do.
    -Buy Side is the Right Side

  93. guest says:

    Who needs “Market Makers” anyway? Lets just get rid of the whole system, and go back to bartering goats and chickens.

  94. Pfluger the Barbarian says:

    I will continue to fuck you until the people love me again.
    – The Kenyan

  95. ExtraordinaryPopular says:

    The real problem here is that most of those in professional finance think they are intelligent by definition. Rather than bothering to look at the fundamentals of what they were studying, they just coasted on the popular regurgitated economic theories and MBA dick sucking.
    Trust me, most of you don't know shit, and no income, degree, or success will change that.
    If any of you bothered to read your history books and fundamental math texts (and, no, not your fucking sophomoric finance texts that you actually think are math) you would have realized this years ago.

  96. guest says:

    Obama has been toasted Brown. @7 is right, BO is a one-termer. He never should have run or been elected, to begin with. It’s amazing people didn’t get his narcissicism and inexperience in 2009.

  97. guest says:

    i love this. able to trade without competition from the (zero cost of capital) banks. at least until a few get rid of their bank holding charters. best of all, at least half of these clowns voted for this. cheers. and congrats on change you can believe in.

  98. guest says:

    @104. couldnt agree with you more. many of these probability distributions in the models were simplified by the clt, which assumes independence. there is very little true independence in financial markets run by humans. so much for the mba. maybe though, they learned team building.

  99. guest says:

    Most of you posting here are a bunch of fucking idiots. You think shit would have hit the fan if the "partnership" model was still around? Not a chance….making money is easy when you don't have to risk your own. Half of you assholes would be out of a job and broke, with your coke dealer wanting his "mother-fucking money" had the government not bailed out the banks…. Now you bitch because Obama wants to go back to Glass-Steagall? Child Please!

  100. guest says:

    @107 Perfectly stated!
    You don't want the American People putting limits on your sorry asses? Well maybe you shouldn't have screwed the pooch and left the taxpayers to wipe your asses! You killed the goose that lays the golden eggs and now you pay for it!!!
    What do you screwball losers do, anyway? You sit around scooping up crumbs left behind by the real brains of America who are transacting deals. Biggest waste of genes the world has ever seen!

  101. guest says:

    A guy who hadn’t a fucking clue presided us into this mess, and a guy who hasn’t a fucking clue is now going to dick around for three more years and that’s it. After that is anybody’s guess

  102. guest says:

    107/108 I'll buy a half pound of what your selling, but I still get the feeling BHO has not one fucking clue as to what to do next. He's ditching TG and Summers and siding with Volker who spent the last year in the reception area of the White House waiting to be heard. So for now it's get tough with banks and teach 'em a lesson, until unemployment hits 20% by then He'll be out of a job himself. He can go back to Chicago and wonder what the fuck just happened.

  103. guest says:

    @107 &108 …. prozac, tequilla or something….cool out dudes (or dudettes). so lets say there is no bailout…. does the world end? maybe the smart guys make even more money? ain't sayin…..just sayin

  104. guest says:

    @109 Totally agree the ass clown has no clue what he's doing. After the Mass loss the whole Dem party is running around like a bunch of friggin chickens with their heads cut off. Totally freaking disaster and the Republicans are hardly in better shape. Is this really the best we've got out of 300 million people. Street bums could run the place better.
    @110 Wall street shouldn't have gotten a bailout. These are the ass hats who ran around bragging that government should stay out of business's way. Who's the first to run to mommy government with their hands out? The same ass hats. Taxpayers should nail a couple CEOs and then we'll see who's getting screwed.
    -107

  105. guest says:

    110 here: @ 107: i am hearing you on the bailout thing, but a lot of us are just hanging around making money not as banks. (lot's of money this year, with the clown government giving it away with zero percent funding and a great yield curve) so all i am saying is things are good for the good guys as the government continues to try to control the uncontrollable. with their bluster (and thanks to the governmont for showing their cards) this just removes some competition and maybe puts some assets up for a discount. god bless america. (if you are a hedge fund).

  106. Finnegan says:

    Obama's changes won't hurt anyone, if they do get passed. Firms like Goldman will just revert to whatever business format works best for them. Same way they became a BHC to save their own ass and trade on cheap capital, they will flip back when the gov puts on the pressure.
    As for Obama, he is no idiot, but he is hemmed in by Republicans, Democrats and the stupidity of the average voter.
    Republicans have opted to do nothing: (1) proposing tax cuts as a solution to every problem, while at the same time lamenting deficits and (2) calling Obama socialist while knocking him (the government) for not "creating" jobs. WTF?
    And the average voter, maybe out of work, perhaps pissed at overpaying for their homes, buys into the talk and chatter. You can sit and say, "Barry has not done fecal" what with 10% unemployment, while ignoring that actions started by Bush and continued under Obama saved our country from falling on its financial ass. And that you don't undue near collapse and then spontaneously manufacture 5% unemployment with magic flowing out of your rear.
    Obama probably wanted to reform healthcare, and use that win as momentum for other things, but has to deal with delusional left wing colleagues in his own party who want it all, and a navel gazing opposition that can argue tax cuts and deficit reduction with a straight, if mathematically challenged, face.
    In any case, the Goldman's of the world will be fine, but Obama is best served by ignoring the populist impulses floating around, and saying FU to more people on both sides of the aisle.

  107. guest says:

    Regulate the products, not the industry. The industry already has sufficient regulation. Let’s break up the Government; not the banks. History proves that big government curbs growth and is a disaster in the long run.
    Now excuse me as I have to liquidate what is left in my investment accounts b/c we are going back to DOW 7000

  108. guest says:

    what a monkey

  109. guest says:

    #115 = Howard Cossell?

  110. guest says:

    Investorcluzo, while flattering, a few people in my circle who also read this site think I'm you. From the same state, a Crusader alum, disdain for the Kinkaid school, sharing similar views on other matters, etc…
    Do whatever you're comfortable with to dispel these rumors, there's a few bucks in it for me :)

  111. latino says:

    i'd like office space:
    Fuck you, fuck you, and yea, fuck you… i'm out.
    take my passport and back to the motherland.