The message of the voters of Massachusetts was heard

The message of the voters of Massachusetts was heard. In the aftermath of the devastating setbacks registered by the Democratic majority in the fief of the Kennedy, US President hardened his line on the regulation of Wall Street reform yesterday. The double presented yesterday by Barack Obama aims both to severely limit the "trading on own funds" (transactions with own funds of the Bank, see below), to prohibit the detention of "hedge funds" and investment funds by commercial banks and to establish new limits in terms of commitments to the "too big to fail" institutions Still stayed on the green light from Congress, this "course correction", which is part of the ongoing legislative reform, represents a significant round of screws in the approach to the regulation of Wall Street.

"" Banks will now be authorized to hold, in invest or sponsor of "hedge funds" ", the Fund of private equity or the operations of"trading"on own funds for their benefit, without connection with the service of their clients", said yesterday Barack Obama the White House, alongside Paul Volcker, his advisor for the economic reconstruction and the Vice-PresidentJoe Biden. In addition, a new proposal to limit the concentration of the banking sector in the future "by asking more stringent limits on the excessive growth of the market shares of the largest financial firms and supplementing existing ceilings in terms of deposit market share". These new rules, termed 'Volcker rules' by the President, are intended to fill the gaps in the current regulatory system that allowed banks to take "reckless" risks threatening the financial system as a whole. "Never again the taxpayer can be taken hostage by a bank"too big to fail"," Barack Obama stressed.

The revenge of Volcker

In the wake of the announcement of the Bank tax of 117 billion dollars over 12 years, this new round of screw is intended to limit the scope of the activities at risk of investment banks. Despite the measures announced on blur - concentration thresholds is not specified, even if the President's entourage refers to a possible challenge to the ceiling of 10 of bank deposits introduced in 1994-, they meet for the first time to the appeals of the former President of the Federal Reserve, Paul Volcker, to a recovery of the spirit of the Glass-Steagall Act on the separation of the activities of Bank for investment and commercial bankabolished in 1999 under Bill Clinton. Appointed a year ago, President of the Economic Recovery Advisory Board - an advisory body composed of business leaders and trade unionists - the former boss of the FED was here an isolated voice. But Barack Obama entourage notes that it is not question to return to a strict separation of these activities, only the brokerage on own funds being provided in question.

This new device is also an indirect response to the "case Goldman Sachs" arouses more in addition to frustrations on Wall Street, including among its competitors. In a recent speech to the Economic Club of New York, Paul Volcker, has defended the need to "fight the lobbies" seeking to block the reform of the regulation. It also directly criticized Goldman Sachs, sometimes called the "government sachs" because of its proximity with the Treasury Board links, for having received $ 10 billion by continuing to engage in activities of trading on own funds for its own account. According to a spokesman for Goldman Sachs, this activity however represented "only 12 of its net revenues on average since 2003". But all of the activities of trading and portfolio in own account ("principal investments") management represented 90 of its results before tax last year. The main firms covered by the limitation of operations on own funds also include JPMorgan Chase and Morgan Stanley.

It remains to know if the US Congress will endorse this new demonstrative anger coup of President in turn.