In an effort to avoid another financial meltdown, Obama is asking Congress to limit the size and activities of the nation's largest banks. The plan includes two components. First, expanding the limits on how larges banks can get. Second, encouraging banks to stick to basic banking and stop risking trading of assets and owning hedge funds. The first is simple. The second is a little more interesting. Banks can continue these activities- if they don't want to have the federal safety net, which includes deposit insurance, the ability to borrow from the Fed, and the knowledge that they will be bailed out if they fail. Form Fed chairman, Paul Volcker, has been proposing the same plan for months, but has been largely ignored. Now, Obama wants to send a signal to Main Street that he is tough on Wall Street. The fate of this proposal lies largely with Senate Republicans. They have the choice of siding with the president or siding with the "too big to fail" institutions that ruined the economy.
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