Back to the Future for Banks

The anticipated financial regulatory reform from the Obama administration may be surfacing on the heels of a dramatic defeat of the Democratic candidate in the race for the Massachusetts Senate Seat vacated by the late Ted Kennedy.  The defeat results in a loss of the Democratic super-majority in the U.S. Senate and a potential defeat of the much heralded health care reform bill.  The Wall Street Journal announced the President's next move.

President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country's biggest banks, marking the administration's latest assault on Wall Street in what could mark a return – at least in spirit – to some of the curbs on finance put in place during the Great Depression, according to congressional sources and administration officials.

The proposal represents a sharply different philosophical shift from the view of banking over the last decade, which saw widespread consolidation among large financial institutions to create huge banking titans. If Congress approves the proposal, the White House plan could permanently impose government constraints on the size and nature of banking.

With this move, the President is certainly looking to overcome his health care disappointment by garnering public support for a return to tighter restrictions on the nation's banks.  Given the current mood among the electorate, his probability for success in this arena is high.