Industry: Banking Proposal 'A Debacle'

WASHINGTON, DC-Last week President Barack Obama proposed implementing new rules that would rein in the size and scope of the largest financial institutions. Although details were scant, certain proposed measures included restrictions on some banks’ ability to trade securities–including mortgage backed securities–for their own account or set up in-house hedge funds.

These measures, which have been interpreted to mean a reintroduction of tighter controls over the risks banks were allowed to take under the Glass-Steagall Act, would be on top of the proposed Consumer Protection Financial Agency that has been introduced in legislation. Angst over the proposed measure is widespread, both in the general market and the more narrow commercial real estate finance space.

Much of the concern is that the proposed measures introduce yet another element of uncertainty in what has been a turbulent year, says Ellen Marshall, co-chair of the Banking and Specialty Finance Practice group at Manatt, Phelps & Phillips, LLP.