U.S. President Barack Obama is calling for tighter regulation of America's largest banks and lending institutions. The president's plan would let regulators limit the size of big banks and rein in their risk-taking activities.
President Obama says he wants to avoid a repeat of last year's failure of several banks and other financial firms, which devastated the U.S. economy.
After years of corporate mergers in the financial industry, the president is calling for legislation to prevent the further consolidation.
He says he wants to ensure that the failure of a single, large financial firm would not threaten the entire economy. "Never again will the American taxpayer be held hostage by a bank that is too big to fail," he said.
Mr. Obama also says he wants to bar big banks from financial trading for their own benefit. The practice, known as proprietary trading, generally shifts the risk to taxpayers while banks make money.
"In recent years, too many financial firms have put taxpayer money at risk by operating hedge funds and private equity funds and making riskier investments to reap a quick reward. And these firms have taken these risks while benefiting from special financial privileges that are reserved only for banks," he said.
Presidential adviser Paul Volcker, a former Federal Reserve chairman, has suggested that Mr. Obama get tougher on big financial firms. The president refers to his proposed restriction on risky behavior as the "Volcker Rule." "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 customers," he said.
The president is asking lawmakers to add these provisions to financial reform legislation that has passed the House of Representatives and is being considered in the Senate.
This is the third time in a week that Mr. Obama has proposed tougher regulation of financial institutions. Last week, he called for about 50 of the country's largest banks to pay a fee to help repay taxpayers for last year's financial industry bailout. This week, the president told lawmakers that any financial reforms should include an independent agency to protect consumers.