Market plunges on Obama bank crackdown

from MoneyTrading.com.au

Stocks on Wall Street plunged overnight after US President Barack Obama announced plans to limit the size and power of American banks. In a very public swipe at Wall Street, Mr Obama blamed banks for sparking the worst economic crisis since the Great Depression and said common sense reforms were needed.

Wall Street gave an immediate –ve reaction to the plan, with the Dow Jones industrial index sinking 2 per cent as the president delivered his announcement.

Mr Obama says the financial system is far stronger today than it was a year ago, but is still operating under the same rules that led to its near-collapse. Now he wants to ban banks from proprietary trading operations, where a firm makes bets on financial markets with its own money.

"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 own customers," he said. "These firms should not be allowed to run these hedge funds and private equities funds while running a bank backed by the American people."

The plan is the latest attempt by the White House to harness popular anger at massive Wall Street bonuses and tight credit markets as Congress heads to a crucial election year.