From Jia Lynn Yang at CNNMoney: Banking reform: Harder than is sounds
President Obama has finally presented a way to reform Wall Street that matches the scale of the problem.
--the president is going straight after the "too big to fail" issue, they banks may realize at long last, how much they've messed up in Washington.
Obama's proposal: Separate a bank's riskiest operations from the parts that are vital to the economy functioning, like deposits and loans to individuals and businesses.
Critics say the intentions here are good, but the dividing line between commercial banking and risky proprietary trading can be harder than you would think.
"In commercial banking you make loans. In investment banking you deal with securities."
"The thing is, loans have become instruments that are pretty fairly traded. You can't tell me the characteristics of a loan that makes it different from a security."
Many people feel that the economic crisis was caused by the bank's in-house hedge funds and private equity funds. But the majority of the problem was people buying homes that shouldn't have by taking out bad loans, which was then aggravated by derivatives and credit default swaps. Putting restrictions on the banks is not the answer everything is getting tighter and tighter and will only make things worse. Just restore things back to where they were before the dawn of the exotic loans. It's that easy. Plain and simple.
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