[JURIST] US President Barack Obama proposed new banking rules [statement; press release] Thursday that he claims would stabilize the banking system and reduce the risk of future bank failures. The legislation [Washington Post report] would prohibit banks from owning, investing or sponsoring hedge funds, private equity funds, or proprietary trading funds for profit where the funds do not benefit the banks' customers. Obama termed this rule the "Volcker Rule" after former Federal Reserve Chairman Paul Volcker [official profile], who stood behind Obama during Thursday's announcement. The second part of Obama's proposed legislation would prohibit future consolidation between banks to prevent any one bank or small group of banks from having a disproportionate, and potentially negative, impact on the economy. Obama emphasized his commitment to banking reform, stating:
I welcome constructive input from folks in the financial sector. But what we've seen so far, in recent weeks, is an army of industry lobbyists from Wall Street descending on Capitol Hill to try and block basic and common-sense rules of the road that would protect our economy and the American people. So if these folks want a fight, it's a fight I'm ready to have.
In December, the US House of Representatives approved a bill [JURIST report] that would create a consumer protection agency, strengthen financial oversight and prohibit certain types of predatory and abusive lending. The US House Financial Services Committee [official website] had approved a bill [JURIST report] to create a consumer financial protection agency in October, after originally delaying [JURIST report] it at the behest of financial industry leaders in July. The creation of the agency is a key step in achieving Obama's stated goal of tightening financial industry regulations. In June, the administration proposed a broad series of regulatory reforms [press release; JURIST report] aimed at restoring confidence in the US financial system.