US President Barack Obama goes after the banks

On January 21, US President Barack Obama shocked the financial markets by proposing rules that would prohibit commercial banks from making trades for their own accounts and prohibiting banks from owning or investing in hedge funds or equity funds.

"We should no longer allow banks to stray too far from their central mission of serving their customers," Obama said in a White House address.

The proposals were immediately dubbed the "Volcker Rule", a nod to the aggressive cutbacks advocated by former US Federal Reserve chairman Paul Volcker, and a sign of who Obama is listening to these days.

Volcker argues that limiting commercial banks from wading into investment banking would be in the spirit of the Glass-Steagall Act, the now defunct Great Depression era law that put a wall between commercial banks' investment banking operations and their deposits. Congress repealed Glass-Steagall in 1999.

The Volcker Rule -- which at this stage is murky on the details -- is not an exact replica of Glass-Steagall. It appears as if big banks would still be able to engage in flow business and make trades for the benefit of their clients; they just wouldn't be able to engage in such transactions for their own benefit.