02 February, 2010

Volcker calls for commercial bank trading limits

Business Week
Prohibiting commercial banks from some high-risk trades should be an essential component of broader financial regulations and would cut back on institutions deemed "too big to fail," former Federal Reserve Chairman Paul Volcker said Tuesday.

Volcker testified before the Senate Banking Committee, pushing new bank limitations on behalf of President Barack Obama. The Obama administration wants to add the restrictions on trading to legislation that would overhaul financial regulations.

Obama has embraced Volcker's idea to prohibit large financial companies that have both commercial and investment functions, such as Goldman Sachs, from engaging in speculative trading. Large banks have said they oppose the idea.

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