Market Analysis

U.S. President Barack Obama announced the reform of the U.S. financial system. The new leader of the largest economies of the world took a year to formulate their claims to American banks. According to Obama promulgated a draft reform plan will be restrictions on the size of banks and their activities in the securities market.

expect radical changes - they have already been compared with the restrictive laws of the Great Depression. The Republican minority and the bankers themselves iinitsiativami Obama, as expected, very unhappy.

draft new rules for the banking sector will be the first major reform carried out by the Obama administration in the economic sphere.

Before this case was limited to de minimis or merely temporary steps. Meanwhile, the democratic team entered the elections under the slogan "change", and with them there was some hesitation. Have already begun to say that the difference between former President George Bush and Barack Obama is purely cosmetic, since they both do the same thing.

In these circumstances, the administration had to act quickly, because the image of Obama as "savior" in the U.S. recently pretty tarnished. The more that public irritation at the bankers began to reach boiling point. In general, the goal for revitalization was evident.

Bankers blamed for the crisis they learned nothing - come to himself after the collapse of financial markets in autumn 2008, they were as if nothing had happened returned to their normal activities. Such pathos figured in Obama"s speech on January 21, devoted to innovations in the financial industry. "While the financial system has now become much stronger than a year ago, and it works by the same rules, which nearly caused her to collapse - he said. - My desire to reform the system, only got stronger when I saw that the same firm who are opposed to reforms, are returning to their old practices, and when I see that the structure, claiming that they had no money for lending to small businesses, are making record profits. This is precisely the most irresponsible, who convinces us that reform is needed " .

Barack Obama has proposed several measures that will be required to ensure "responsible" banks to enforce. First, commercial banks would be prohibited from conducting transactions in financial markets at their own expense. All such actions should be performed only with the involvement of the clientele. Lending institutions also lose their right to own hedge funds or private equity funds established for their money.

The reason for such a step is too high a risk, which usually involve transactions with their own means. In addition, there is a conflict of interest, because banks often persuade their clients to invest in securities in which they have already invested, but their value decreased. Thus, they pose a threat, and funds raised from investors.

Secondly, the U.S. president promised to limit the uncontrolled growth of banks in size. The financial crisis has led to the consolidation of several financial institutions (think fusion Wells Fargo and Wachovia, Bank of America and Merrill Lynch, JP Morgan and Bear Stearns), creating the present giants. At the same time, the size of a crisis does not save, on the contrary, as shown, exposing the financial system at greater risk. If a small bank can be allowed to fail, then the collapse, for example, Citigroup, could bring down the entire banking sector.

assumed that the existing restriction on the proportion of deposits inthe market will be installed and the ceiling on the total commitment of one particular bank.

Interestingly, the chief ideologist of the reform, which expects to hold the U.S. administration, is an Obama advisor, former head of the Federal Reserve Paul Volcker. Once he was a prominent neo-liberal and one of the sponsors of "Reaganomics." Now Walker has become one of the most active supporters of the abolition of the economic and financial policy, which he once preached. Obama also supported the former head of the Securities and Markets (SEC), Bill Donaldson, chairman of the House of Representatives Committee on Finance Barney Frank and the head of the Senate banking committee Chris Dodd.

According to senior lawmakers in the current system, there is the original injustice. Banks can borrow at extremely low rates at the Fed, to use taxpayers" money in the form of state aid (as happened in the autumn of 2008), and at the same time does not bear any responsibility for risks. In general, the plan has something in common with the law Glass-Stigolla taken during the Great Depression, and demanded a mandatory separation of investment and conventional commercial banks (it was repealed in the 90 years), although a slightly more moderate.

Search "villain"

However, immediately after the announcement of Obama"s creation of the new rules started to be heard and the voices of discontent. First, angered the bankers themselves, who naturally do not want more regulation of their activities and lower profits. Transactions in own money bringing the six largest U.S. banks from 1 to 10 percent of all revenue. Deprivation of such a possibility would be a severe blow to profits.

For example, Goldman Sachs CFO David Vinyar rules called Obama "impractical". According to him, return the situation to the point that existed in the financial markets before the abolition of the law Glass-Stigolla will be extremely difficult, given the global reach of modern financial institutions.

with greater intolerance Obama responded to the suggestions of his political rivals. The Republican Party traditionally protects the interests of big business, including financial, accused the president to seek a scapegoat. Number two on the list of Republicans in the Senate, Jon Kyl, said: "They have just suffered a major defeat (there is a victory for the Republican Party over the Democrats in the elections to the Senate in Massachusetts) and are now looking for" villains ".

above victory Republican Scott Brown seriously complicate the administration for the promotion of the law in Congress. With the victory of Massachusetts Republicans received 41 th place in the Senate, and deprived the Democrats of the constitutional majority, which they had. Given the strong position of the Republicans who reject the strengthening of bank regulation, as well as the activity of the powerful lobbyists the financial sector, to win the White House will be incredibly difficult.

But the retreat also impossible: despite claims of overcoming the crisis, the economic situation in the U.S. remains difficult. Unemployment is not going to deviate from the 10 per cent mark, while the increase in the real sector is likely to remain modest. Public opinion still require some sort of action against "banksterov" (American neologism derived from combining the words "banker" and "gangster"). So some part of the conceived Barack Obama will probably do still fail.

Dmitry Migunov

Review of the FOREX market for 22.01.10
Russia"s new ambassador Zurabov arrived in Kiev
Banks shall be driven from securities
Russia indices by noon managed to close the morning gap and get to the positive region
Recommendations on the shares of Gazprom, Lukoil, Rosneft, Gazprom Neft, Sberbank and VTB
It is unlikely that correction of Russia"s market will continue strong in the coming days
The turnover of trading on the MICEX Stock Exchange amounted to 84513.6 million rubles
In the near future is expected to continue growth in the major world indices
Fund Finam - Capital investments has become more accessible to investors

News and Comments