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Daily View: Obama's bank reforms

Clare Spencer | 10:42 UK time, Friday, 22 January 2010

President ObamaPresident Obama has unveiled proposals to rein in the US banking industry, including setting a limit on the size of banks and restricting the investment activities of retail banks. Commentators consider the merits of the plans.

Jackie Calmes, writing in the New York Times, says President Obama's tougher approach reflects a changed political climate and a shift in big banks' fortunes:

"In calling for new limits on the size of big banks and their ability to make risky bets, Mr Obama was throwing a public punch at Wall Street for the third time in a week, underscoring the imperative for him and his party to strike a more populist tone, especially after the Republican victory Tuesday in the Massachusetts Senate race."

Michael Shear and Binyamin Appelbaum, writing in the Washington Post, say Mr Obama's proposal comes as his administration shifts from efforts to bail out the banks to attempts to restrict the practices that fuelled the economic crisis:

"In essence, Obama is now aiming to force the firms to choose between the federal benefits that come with being a bank and the unbridled pursuit of profits. After opposing proposals such as hard limits on executive bonuses, the administration is embracing a tougher line - more evidence that Obama has the industry in his sights as he seeks to show Middle America that he feels its economic pain."

Writing in the Wall Street Journal, Jonathan Weisman says it took months of wrangling for Mr Obama's economic team to agree on a shift in policy towards the biggest US banks:

"The White House's relationship with Wall Street is close to its breaking point. Democratic lawmakers and the administration have made banking policy a central part of their 2010 campaign playbook. Now, America's big banks are facing a double threat: an increasingly tough policy response to the financial crisis that is getting a goose from the White House's increasingly heated political rhetoric."

UK response

The UK media have been looking at whether President Obama's reforms should be copied in the City.

James Moore in the Independent argues that the UK couldn't rein in the banks without the US doing so first:

"The threat to quit Britain over the tax made by some bankers is both sickening, and cynical. But it is real.
"That's the problem with unilateral measures. And that's why they have yet to be followed by anyone else. Until, that is, President Barack Obama decided to join in. The advantage he has is that it's much harder to threaten the US President. He sits at the head of the world's biggest economy, many of the world's biggest banks are American and he has the tools to haul them into line."

The Guardian editorial urges Gordon Brown to follow Barack Obama's lead:

"Still, say this for the president: when other governments kept harping on about how any serious reform could only be done internationally, he has just gone ahead and done it. No G20 agreements, no OECD working party, just political will. Gordon Brown, over to you."

Larry Elliot in the Guardian says it's now the UK government's turn to act:

"The argument every timid policy maker in Britain makes when confronted with the need for reform of the City is that there is no point in doing anything unless the Americans are on board.
"Now, after what has clearly been a bloody internal battle within the Obama administration, they are. Everything that Obama said about Wall Street could have been said by Gordon Brown about the City. London needs an even stronger dose of the same medicine."

The Daily Mail singles out the Conservative party as wanting to follow Obama's example with the banks:

"This is encouraging news - and it's even better that George Osborne wants to do the same thing here in Britain. It's early yet, but at long last the days of undeserved plenty for greedy bankers may be numbered."

The Times editorial warns against the UK copying Mr Obama's policies:

"In the UK, the Treasury, the Conservatives and the Liberal Democrats have all welcomed Mr Obama's proposals. Theirs too is a short-term populist response with little economic logic. A thriving financial services sector is essential to an efficient economy. Tight financial regulation is essential, but badly designed measures will merely drive business to other banking centres. The City of London may prove to be the biggest beneficiary of Mr Obama's campaign, apparently to the discomfort of British politicians. There is nothing wrong and much to prize in a bloated financial sector, if that is the way that the UK corporate sector can generate profits. It is past time to stand up for bankers."

The BBC's Business Editor Robert Peston said on Radio 4's Today programme that splitting up retail and investment banking may not be possible in the UK:

"The other interesting question is how easy it would be to implement reforms in the UK if the European Union were going in another direction. I suspect that, in a purely legislative sense, it would be pretty tricky for the UK to go with America but against the wishes of the rest of the European Union."

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Links in full

New York TimesJackie Calmes | New York Times | With Populist Stance, Obama Takes On Banks
Washington PostMichael Shear and Binyamin Appelbaum | Washington Post | Tough limits on banks
Wall Street JournalJonathan Weisman | Wall Street Journal | Policy Pivot Followed Months of Wrangling
GuardianGuardian | Barack Obama and the banks: At last, action
GuardianLarry Elliot | Guardian | Everything about Wall Street could be said about the City
TimesTimes | Cross of Goldman
TelegraphRory Bremner | Telegraph | Bankers complain, but their party goes on
IndependentJames Moore | Independent | Only the US has muscle to make banks behave
IndependentIndependent | What the banks deserve is not just rage, but reform
EconomistEconomist | The weakest links
BBCRobert Peston | BBC Today Programme

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