Thursday’s Headlines: Obama to Propose New Limits on Banks

BY Jason M. Breslow  January 21, 2010 at 8:58 AM EDT

Turning the focus from health care to the economy, it was widely reported Thursday morning that President Obama is set to propose new regulations that would limit the size of the nation’s largest banks and the scope of the risky activities they partake in.

The president’s plan is expected to include proposals long endorsed by Paul Volcker, former chairman of the Federal Reserve. In addition to facing new restrictions on size, banks would be barred from engaging in proprietary trading, by which banks use customer deposits and borrowed money to carry out trades. The practice is credited with encouraging the proliferation of mortgage-backed securities that led to the 2008 financial crisis.

The proposal would have the largest effect on the nation’s biggest banks, including Bank of America, Citigroup, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, and Wells Fargo. If approved by Congress, the measures would return part of the curbs placed on finance during the Great Depression, and as the Wall Street Journal notes, “permanently impose government constraints on the size and nature of banking.”

“The heart of my argument,” Volcker is quoted in today’s New York Times, “is who we are going to save and who we are not going to save. And I don’t want to save what is not at the heart of commercial banking.”

“The banks of course will scream blue murder, while at the same time trying to say that those kind of walls exist already,” writes Felix Salmon, a blogger for Reuters. “But they can’t have it both ways.”

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Congress: Fresh off his upset victory in Tuesday’s special election, Sen.-Elect Scott Brown, R-Mass., heads to Washington today to meet new colleagues and members of his state’s Congressional delegation.

Speaking to reporters in Boston before his departure, Brown said he has been asked what type of Senator he plans to be. “Bottom line, he said, “… I’m going to be a Scott Brown Republican. Maybe there’s a new breed of Republican coming to Washington. Maybe people will finally look at somebody who’s not beholden to the special interests of the party, and who will look just to solve problems.”

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Haiti relief effort: The U.S. Navy hospital ship “Comfort” has opened to survivors off the coast of Port-au-Prince, but relief workers are increasingly worried about the risks of untreated wounds and spreading disease, according to a report in the NYT. “Because of untreated injuries, infectious diseases and dismal sanitary conditions, health workers said that the natural disaster that struck Haiti more than a week ago remained a major medical crisis and that, unless quickly controlled, it would continue to take large numbers of lives in the days and weeks ahead,” the paper reports.

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“Tonight Show” deal: And NBC is said to have reached a deal with Conan O’Brien for his exit from “The Tonight Show,” paving the way for Jay Leno’s return to the late-night program he hosted for 17 years.