Today, the people see in the financial sector not the skilful hands of erstwhile masters of the universe, but the grabbing hands of greedy ingrates. It is little wonder, then, that a desperate President Obama, battered by the voters in Massachusetts, has turned upon a group even less popular than his party. He has duly added the axe of Paul Volcker, 82-year-old former chairman of the Federal Reserve, to the regulatory scalpel offered by his Treasury secretary, Tim Geithner.
Mr Volcker is proposing a version of the distinction between commercial and investment banking brought into the US by the Glass-Steagall Act of 1933. In announcing his new proposals last week, Mr Obama referred to a “Volcker Rule” that “banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers”. Furthermore, added the president: “I’m also proposing that we prevent the further consolidation of our financial system.”
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