Obama: The War On Wall Street

By Author: Alfonso Tuor
Total Articles: 62
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A year after his inauguration at the White House Barack Obama makes a sensational and unexpected turn. U.S. President declares war on Wall Street as it followed the arguments of the former number one from the Federal Reserve, Paul Volcker. Proposes a reform of the banking system, whose spirit goes back to legislation passed in the thirties at the height of the Great Depression: the provision imposes a separation between commercial banks, who collected the savings of citizens and were guaranteed by the state, and investment banks who could not collect the savings, but they could try their hand at high-risk operation. This separation was repealed by the Clinton administration in the nineties on a proposal by the then Minister of the Treasury, Larry Summers. He is now the head of the team of economic advisers Democratic administration, which previously had been profiled for a strong defense of the interests of Wall Street. The turning point of the American president, no doubt motivated by the defeat of the Democratic candidate in the election of the successor to Ted Kennedy in the Senate, is just a slap to Larry Summers, the Treasury ...
... Secretary Tim Geithner, and the number one Federal Reserve Ben Bernanke. It is therefore likely that in the coming days will be the first political fallout of this change. The proposals launched last week by Obama are set to change profoundly the U.S. banking system and also affect the activities of foreign banks operating in the United States, such as UBS and Credit Suisse, as they also have to adhere to U.S. law. It is likely that European countries are forced to follow in the footsteps of the United States. Already the British Conservative Party, which polls give winning the next election, has officially communicated that it introduced in Britain the same rules. The basic ideas, which must be translated into rules of implementation, designed to address two key issues: the moral hazard of banks too big to fail (and thus benefiting the state guarantee) and the speculative activities conducted by banks with their own means. 'The big commercial banks - said Obama - will no longer conduct market operations on behalf of his portfolio will not invest in hedge funds or private equity firm and will not have deposits in excess of 10% of total deposits Americans . This 10% from now on will also cover the uninsured deposits and other assets of the budget.
These guiding principles constitute a real revolution. Institutions such as Goldman Sachs and Morgan Stanley will be forced to give up the license of a commercial bank, acquired in haste in the fall of 2008 to qualify for state aid, while giants like JP Morgan, Citigroup, Bank of America will make a slimming , divesting Hedge Fund built and financed in the house and closing the sale of profitable trading working with its own resources. Even foreign banks operating in the United States, according to Obama, will be subject to the same rules. So what is looming as a real revolution in the banking landscape will force even the two major Swiss banks to make the choices that have not yet been made.
The proposals of Obama did immediately go to the barricades Wall Street, which on the one hand, he immediately unleashed his army of lobbyists to make sure that Congress will reject the proposed solutions or the weakened and, secondly, has launched a campaign press to argue that these solutions do not solve any problem and are a resounding failure. From the political point of view, the position of Wall Street is very weak. Surveys show that the vast majority of the American population that is suffering the consequences of the crisis caused by Wall Street, is enraged against a financial sector that has begun to operate as before and to distribute billions of dollars in bonuses. But there's more. The proposals of Paul Volcker, espoused by Obama, gather support, even in the Republican Party, so much so that former White House candidate John McCain has already submitted to the Senate a bill that goes in that direction. Moreover, the American president, accused of lack of leadership, has made it clearly understood that he will use all its political weight in this battle by declaring that "if banks want war, I am ready to fight. The more I see the banks go back to the old way of doing business plus a profit before I return, but at the same time denying loans to small businesses, and more I hear that they can not pay a fee to reimburse the taxpayers their money, the more resolute to pursue this reform. " The press campaign launched by Wall Street focuses instead on the one hand, the costs of reform, and secondly, the ineffectiveness of the measures proposed. The first point is specious. Indeed, the costs of a financial crisis, as shown by the events of recent months, are incomparably greater than the costs of restructuring the banking system due to this reform. The ineffectiveness of the measures is unproven, since the U.S. president laid out the guiding principles, but the proposed rules have yet to be developed by the Administration, Congress must pass the screening and be translated into precise rules by supervisors. So, the devil may still hide in the details, but the guiding principles are valid.
We can conclude saying that Obama has awakened from a slumber that has lasted a year and proposed a reform that addresses the problems of the financial industry and will probably revive the fortunes of a presidency that was increasingly clouded.
Alfonso Tuor