Obama's 'fight' against bank greed leads to stock market plunge
US President Barack Obama launched a scathing attack on Wall Street this week, promising to fight the greed within the financial system that caused its near collapse. But as he spoke about reforms aimed at tackling the finance industry's irresponsible high-risk trading, global stock markets plunged.
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The FTSE-100 fell to its lowest level of the year, the Nikkei in Japan closed at a three-week low and the US Dow Jones suffered its worst fall since October.
In what could be the biggest shake-up of the US financial industry in decades if passed through Congress, Mr Obama's proposals mean that banks will no longer be able to use savers' cash for trading on financial markets and instead will have to use their own capital to gamble. He also proposed a ban on banks investing in hedge funds or private equity funds – a technique that has been widely blamed for the financial downturn, and any US banks that continue to indulge in such activities will be unable to take deposits from consumers.
Shares in Goldman Sachs, which not only earns much of its profits by trading shares and bonds but also gave bankers a whopping 57 per cent pay rise just yesterday, fell by 4 per cent in the wake of Mr Obama's speech. He said: "My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform. If these folks want a fight, I'm ready to fight."
Mr Obama's plans will put pressure on Gordon Brown to take a similar stance with Britain's biggest banks. City Minister Lord Myners insisted that the US proposals were "very much in accordance" with the Government's plans.
What do you think? Has the 'fat cat' culture of the financial system gone too far and should Britain's banks be broken down to prevent taxpayers footing the bill for their trading disasters once again?
