Obama's new policy idea of prohibiting banks from trading, making investments in private equity firms, and hedge funds is rather silly. First, it wasn't their investments in trading that created the problem, it clearly was (an still is) their loans that are failing (primarily in mortgages). The hypocrisy is rather alarming, simply because when any politician (left or right) are driven by approval ratings means they might not always do the right thing. Obama came into office with over 70% approval, promising change and hope. Clearly he was not able to get everything done in the first year and the democrats should not of expected that he could, things take time. However, his approval ratings dropped to 50% by year end (one of the largest drops for any first year presidency). His simple promises were not kept (not hiring lobbyist, 5 day public review of legislation, etc.). His economic advisors were way more optimistic than the Congressional Budget Office and other economists. Certainly bailing out the banks as well as other companies was not popular, but he made that decision and is accountable, responsible, and liable for that decision. The Democrats are very concerned coming into the mid-term election, primarily the Senate seat loss (which was totally unexpected) - even with Obama's campaigning when the Democrat was in the lead - quickly fell by double digits. Obama and Democrats are now looking to make populist decisions (regardless of right or wrong) to garner votes. Politics are now taking a front seat and that is dangerous.
               
Here's the problem with Obama's new policy that is focused on the banks.
 
1.       Certainly the banks got bailed out, but so did GM, Chrysler, AIG, Freddie, Fannie, and others. The majority of the banks paid back their loans, but the others did not. How come he is not critical of the "too big to fail" GM, Freddie, Fannie, and others?  Why is it the banks that have to pay the "FEE" and face all the criticism - as if it was their fault alone?
 
2.       The banks bulk of their loss in the credit crisis was mortgages, not stock market or bond investments. Sure there were some private equity firms in real estate and mortgages, but why would you want to strike down an entire system? This is a primary source of bank revenue, has Obama not paid attention to the last 3 quarter earnings of these banks. If we had it his way the banks would not of seen the recovery in the last nine months.
 
3.       The banks are not to blame for taking government money, the only one that is to blame is Congress, the Fed, and the Administration. How do you get mad at someone that you lent money to and then paid you back? I would be more critical and upset with GM or even worse Freddie and Fannie. That is money we will NEVER see back. The banks paid back the government, but not GM. The government has failed to understand their accountability, responsibility, and liability - they wrote the checks. Remember when the people were protesting the TARP, the government didn't listen then and just wrote the checks?  
 
This is not about proper regulation, this is about making some "tough bold statements" in the light of a slipping approval rating and losing a seat in the Senate. This is about garnering votes and making the populist decision - not the right decision. Obama has been under fire from his own party - this is about politics.
 
                Let's hope that Obama and Congress focus on NEEDED regulation not Grand Standing and knee jerk reactions to win approval ratings. There is a lynch mob out there and the banks (who were bailed out and the banks paid them back) made lots of profit last year. Obama feels the need to do something to boost his failing approval ratings.
 
                This is not meant to be a political news letter, but the more the government intervenes rather than being the regulator - we need to be aware of how this will impact the market.
 
                His statement certainly sent the entire market down yesterday.