Sacking the gold of Goldman Sachs

Just heard that Obama is to forbid proprietary trading by American Banks in general - and Goldman Sachs in particular.

At least Obama is taking a firm line with banks, in contrast to the weak and ineffectual action the British Government has taken. The only thing Alistair Darling seems to have done is attempt to impose a 50% tax on bankers' bonuses; this doesn't actually affect the banks themselves, just some of their staff.

Preventing banks from gambling customers' money on hedge funds and the like, and only allowing them to do so with money they have raised themselves, seems like a sensible step. Kudos to Obama for taking on such a powerful lobby as Wall St: possibly the most powerful interest group of them all. It brings back memories of taking on the tobacco industry. I wonder if anyone will ever make a stand against the oil companies or the defence manufacturers.

I heard on Newsnight last night, and in The Evening Standard, an analysis of Obama's (and the Democrats') plunging popularity in the US. It seems that perhaps US voters blame the Democrats for the state of the American economy, rather than George W Bush and the Republicans who were in bed with Wall St for so long.#

Could it also be possible that voters are conflating 2 different economic packages? That is to say the $800bn bailout of American banks that the Bush administration authorised, which is widely disdained, and the similar amount authorised by Obama as an economic stimulus for the economy, which has kept people in their jobs and is more popular.

However the Democrats aren't entirely innocent in all this. It was during the Clinton years that the Glass-Steagall Act was repealed. Clinton allowed something that had until then been forbidden: the coupling of investment banking and lending. Mixing commercial and investment banking, or making banking and broking indistinguishable, was one of the contributory factors in the banking collapse. Northern Rock did the same here, with its absurd mortgage products. And the Democrats allowed it.

Not only that, but the Democrats in Congress pushed to force banks to lend to 'sub-prime' customers, ie folks who couldn't afford it. A free market would have baulked at such a risk, but the Democrats tried to force the issue and the banks gladly accepted, thinking they could repackage the debts and no-one would be any the wiser.

So no-one comes out too well from this sorry story. But Obama is not doing too badly on this one. He has taken on the banking sector. Credit where it's due.