NEW YORK, Jan 21 (Reuters) - U.S. President Barack Obama said he was looking to make the financial system safer by preventing the biggest banks from taking excessive risks.
Obama proposed steps including preventing major banks from owning, sponsoring or investing in hedge funds for their own profit. 'We simply cannot return to business as usual,' Obama said.
The following are comments from market participants:
TOM SOWANICK, CHIEF INVESTMENT OFFICER, THE OMNIVEST GROUP, PRINCETON, NEW JERSEY
'It looks like Goldman Sachs has been given a reason to give back their bank charter.
'Moreover, it also looks as though banks may be going down the path of being regulated like utilities.'
RALPH FOGEL, INVESTMENT STRATEGIST, FOGEL NEALE PARTNERS, NEW YORK
'This is going to have a tremendous impact on big-name brokerage firms like Goldman Sachs and JPMorgan.
'If they stop prop trading, it will not only dry up liquidity in the market, but it will change the whole structure of Wall Street, of the whole trading community.'
SCOTT MARCOUILLER, SENIOR EQUITY MARKET STRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS
'In the midst of the uncertainty of everyone trying to sort out exactly what (Obama) said, exactly how it will be implemented, and whether it has a chance of getting through Congress, the natural response is to sell now and ask questions later.
'I would think the proprietary trading is going to up there right near the top of the list of what (Wall Street's) not going to like the most. That's the way a lot of the big boy firms generate a lot of revenue and profit.'
GARY TOWNSEND, PRESIDENT AND CEO, HILL-TOWNSEND CAPITAL, CHEVY CHASE, MARYLAND
'We don't have any specifics. All we have is bluster and fulminating from the President so far. In terms of the consolidation comments, what that suggests is that there wouldn't be further mergers of existing institutions. That would not be particularly impactful on trading.
'Putting into law certain restrictions on the combinations of investment and commercial banking, however that might be done, those would be much more impactful and could cause a JPMorgan or Bank of America or Wells Fargo to have to spin off its investment banking operations.'
'I did not hear any mention of Fannie or Freddie in his discussions. I don't think you can talk about root causes of the panic of 2008 without talking about mortgages.'
CHRISTIAN COOPER, INTEREST RATE STRATEGIST, RBC CAPITAL MARKETS, NEW YORK
'The plan to restrict prop trading is the political equivalent of taking on Big Tobacco: a massive business employing untold thousands with well-funded lobbyist and cogent arguments about its potential risks on both sides of the issue.
'I believe the real concern with this plan , should it pass the Congress, is the immediate exodus of capital now under the oversight of a bank's risk management department to a 'wild west' mentality in excess of anything we saw leading up the the crisis.
'If the White House wants to create real systemic risk with zero clarity of who is facing whom, this is the way to do it.'
SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES, TORONTO
'If you look at bank earnings over the last few years, what some of the more astute banks have been able to do is to smooth (out) their earnings using trading activity.
'Presumably this (proposal) is going to hold that down. So the ability to generate revenues just by trading on their own accounts is going to go down.'
JOHN SPINELLO, TREASURY BOND STRATEGIST, JEFFERIES & CO, NEW YORK
'It seems to be putting restrictions on financial institutions in order to generate revenues.
'The whole situation is causing stocks to decline -- that's creating a flight-to-quality bid for Treasuries.
'You don't know if banks are going to be able to separate the commercial banking network from the investment banking business like they did before.
'What's going on right now is confusion, and a lot of questions have to be answered now as to how this will be legislated.'
CARL BIRKELBACH, CHAIRMAN AND CEO, BIRKELBACH INVESTMENT SECURITIES, CHICAGO
'Any government interference is going to be negative to the market, but I'm not expecting a big long-term sell-off on this announcement.
'So far our lows haven't been lower than previous lows. If we break under 10,000, though, that might be a sign that we're headed for downside at least in the intermediate term.'
TODD COLVIN, VICE PRESIDENT, MF GLOBAL, CHICAGO
'It doesn't come as a surprise that he wants to put some more restrictive regulatory oversight in the financial services and financial investment banking.
'But the stock market here is sort of reacting as if it's not really sure how he's going to do it. You're going to rewrite all the books.'
'Right now I don't have enough information to say whether it's even possible. Just saying banks can't trade proprietarily is too vague.'
JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS SADDLE RIVER, NEW JERSEY
'The financial regulation proposed by the government does not seem as if it will directly affect risk taking in currency markets.'
JOE SALUZZI, CO-MANAGER OF TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY
'It was smart by him because politically it's an easy win for him. Hey, nobody likes the banks. The only people who like the banks are the bankers.
'This is an easy W for Obama, especially after he just got pummeled in Mass. Politically very smart.'
(Reporting by Emily Flitter, Angela Moon, Ryan Vlastelica, Nick Olivari, Clare Baldwin and Dan Wilchins; Editing by Ted Kerr)
Keywords: OBAMA FINANCIAL/BANKS INSTANT (Reuters Messaging: dan.wilchins.reuters.com@reuters.net; +1 646 223 6320) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Obama proposed steps including preventing major banks from owning, sponsoring or investing in hedge funds for their own profit. 'We simply cannot return to business as usual,' Obama said.
The following are comments from market participants:
TOM SOWANICK, CHIEF INVESTMENT OFFICER, THE OMNIVEST GROUP, PRINCETON, NEW JERSEY
'It looks like Goldman Sachs has been given a reason to give back their bank charter.
'Moreover, it also looks as though banks may be going down the path of being regulated like utilities.'
RALPH FOGEL, INVESTMENT STRATEGIST, FOGEL NEALE PARTNERS, NEW YORK
'This is going to have a tremendous impact on big-name brokerage firms like Goldman Sachs and JPMorgan.
'If they stop prop trading, it will not only dry up liquidity in the market, but it will change the whole structure of Wall Street, of the whole trading community.'
SCOTT MARCOUILLER, SENIOR EQUITY MARKET STRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS
'In the midst of the uncertainty of everyone trying to sort out exactly what (Obama) said, exactly how it will be implemented, and whether it has a chance of getting through Congress, the natural response is to sell now and ask questions later.
'I would think the proprietary trading is going to up there right near the top of the list of what (Wall Street's) not going to like the most. That's the way a lot of the big boy firms generate a lot of revenue and profit.'
GARY TOWNSEND, PRESIDENT AND CEO, HILL-TOWNSEND CAPITAL, CHEVY CHASE, MARYLAND
'We don't have any specifics. All we have is bluster and fulminating from the President so far. In terms of the consolidation comments, what that suggests is that there wouldn't be further mergers of existing institutions. That would not be particularly impactful on trading.
'Putting into law certain restrictions on the combinations of investment and commercial banking, however that might be done, those would be much more impactful and could cause a JPMorgan or Bank of America or Wells Fargo to have to spin off its investment banking operations.'
'I did not hear any mention of Fannie or Freddie in his discussions. I don't think you can talk about root causes of the panic of 2008 without talking about mortgages.'
CHRISTIAN COOPER, INTEREST RATE STRATEGIST, RBC CAPITAL MARKETS, NEW YORK
'The plan to restrict prop trading is the political equivalent of taking on Big Tobacco: a massive business employing untold thousands with well-funded lobbyist and cogent arguments about its potential risks on both sides of the issue.
'I believe the real concern with this plan , should it pass the Congress, is the immediate exodus of capital now under the oversight of a bank's risk management department to a 'wild west' mentality in excess of anything we saw leading up the the crisis.
'If the White House wants to create real systemic risk with zero clarity of who is facing whom, this is the way to do it.'
SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES, TORONTO
'If you look at bank earnings over the last few years, what some of the more astute banks have been able to do is to smooth (out) their earnings using trading activity.
'Presumably this (proposal) is going to hold that down. So the ability to generate revenues just by trading on their own accounts is going to go down.'
JOHN SPINELLO, TREASURY BOND STRATEGIST, JEFFERIES & CO, NEW YORK
'It seems to be putting restrictions on financial institutions in order to generate revenues.
'The whole situation is causing stocks to decline -- that's creating a flight-to-quality bid for Treasuries.
'You don't know if banks are going to be able to separate the commercial banking network from the investment banking business like they did before.
'What's going on right now is confusion, and a lot of questions have to be answered now as to how this will be legislated.'
CARL BIRKELBACH, CHAIRMAN AND CEO, BIRKELBACH INVESTMENT SECURITIES, CHICAGO
'Any government interference is going to be negative to the market, but I'm not expecting a big long-term sell-off on this announcement.
'So far our lows haven't been lower than previous lows. If we break under 10,000, though, that might be a sign that we're headed for downside at least in the intermediate term.'
TODD COLVIN, VICE PRESIDENT, MF GLOBAL, CHICAGO
'It doesn't come as a surprise that he wants to put some more restrictive regulatory oversight in the financial services and financial investment banking.
'But the stock market here is sort of reacting as if it's not really sure how he's going to do it. You're going to rewrite all the books.'
'Right now I don't have enough information to say whether it's even possible. Just saying banks can't trade proprietarily is too vague.'
JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS SADDLE RIVER, NEW JERSEY
'The financial regulation proposed by the government does not seem as if it will directly affect risk taking in currency markets.'
JOE SALUZZI, CO-MANAGER OF TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY
'It was smart by him because politically it's an easy win for him. Hey, nobody likes the banks. The only people who like the banks are the bankers.
'This is an easy W for Obama, especially after he just got pummeled in Mass. Politically very smart.'
(Reporting by Emily Flitter, Angela Moon, Ryan Vlastelica, Nick Olivari, Clare Baldwin and Dan Wilchins; Editing by Ted Kerr)
Keywords: OBAMA FINANCIAL/BANKS INSTANT (Reuters Messaging: dan.wilchins.reuters.com@reuters.net; +1 646 223 6320) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.