Obama Unveils Ways to Restrict Mega Banks

President Obama on Thursday proposed two new ways to restrict the size and activities of large commercial banks. To reduce the risk posed by banks, the President said he would ask Congress to bar them from proprietary trading or from owning, investing in or sponsoring hedge funds or private equity funds. "You can do proprietary trading or you can own a bank, but you can't do both," said a senior administration official that briefed reporters. The administration also wants to limit future growth by capping an individual bank's share of the total market for nondeposit liabilities. The official made clear these changes would not be applied retroactively. "It's designed to restrain future growth," he said. "It's not about reducing liabilities within the share the existing structure." He likened the new cap to one that currently prevents any bank from doing acquisitions once it controls more than 10% of the nation's deposits. The official said the cap on nondeposit liabilities would not necessarily be set at 10%. He said the administration would work with Congress and regulators to determine the proper cut-off.