- ABC News -
Obama's plan to limit banks' size and risky trading has spooked investors, but analysts say it would have only marginal effect on institutions like JPMorgan Chase, Bank of America and Citigroup — and would be hard to enforce. And it's not clear the rules would reduce taxpayers' risk of having to bail out another big bank.
The White House has yet to provide details of the plan outlined Thursday. But attention has centered on Obama's effort to bar the biggest banks from doing what's called proprietary trading. That's when banks use their own money to make high-risk bets. If those bets go bad and a bank goes under, taxpayers could be on the hook.
Fearing the Obama plan might reduce bank earnings, investors reacted by dumping financial stocks Thursday, helping send the Dow Jones industrial average down 213 points. The pessimism continued Friday, with the Dow losing more than 216 points. Also weighing on the market were corporate earnings reports that failed to meet investors' expectations.
The proposed overhaul marked Obama's latest effort to more tightly police the nation's largest banks. Last week, the president proposed a tax on banks to recoup billions in bailout money that was handed out at the height of the financial crisis in 2008.