Banks which take deposits will not be allowed to use their own money to take bets on markets, run hedge funds or make private equity investments through what he called the "Volcker rule" after former Federal Reserve chairman Paul Volcker.He also wants to prevent further consolidation of the financial system in the US and will ban takeovers and mergers among American firms in the sector.
Obama said the new proposals would keep taxpayers from being "held hostage" by banks that have become "too big to fail" and that pose a risk to the entire financial system.
While I ambivalent about the treatment, the diagnosis is hard to argue with, which leads me to wonder whether we shouldn't apply the same logic to the sixth largest economy in the world.
Mr Dimon told investors at the Wall Street bank's annual meeting that "there could be contagion" if a state the size of California, the biggest of the United States, had problems making debt repayments. "Greece itself would not be an issue for this company, nor would any other country," said Mr Dimon. "We don't really foresee the European Union coming apart." The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.California however poses more of a risk, given the state's $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.
California is literally 'too big to fail', and that presents a long-term, systemic problem for the U.S. The implications of a federal bailout for the state are enormous, both in political and economic terms. We would in effect, no longer have a federal state, and the metamorphosis into France would be complete.
Time to break up the state.
