What I love about the proposed new legislation (that the media informs us, is aimed at "reigning in" banks, giving us the impression that they've become wild horses) is that it will limit proprietary trading. PT is what disgusted me enough to abandon dreams of a career in London's financial district and instead work on something "real" ("real" in this case being the Network Computer).
Simply put, proprietary trading allows bank employees to take bets with the bank's own money - in things like commodities, Forex, equities, fixed income instruments and corporate and government bonds. Makes markets more efficient, say the bankers through their Porsche windows at traffic lights. Makes my petrol and food more expensive, I say, remembering volatility in petrol prices caused by huge speculative effort (banks giving the most weight to this). And airlines having an excuse adding a "fuel surcharge" to their fares (to offset their non-fuel operational costs).
"Capping the overall size of banks" sounds knee jerk to me. But if it can clip the wings of the bank-that-one-dare-not-name, I'm all in favour.
In short, I'd say that the government's plan needs some time to be thought out. With non-lobbyist bankers representing the banks' interests. "How big should a bank be", "what reserve limits should be enforced", "what would the underwriting limits be for commercial lending", "how risky can their bets be" are all questions that need to be answered.
Meanwhile, I'm off to the ranch to reign in some Mustangs (the kind that don't have an investment banker sitting inside).
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