Obama Proposal Won’t Hurt U.S., Top Congressman Says

Jan 26 2010 | 11:53am ET

A top Democratic leader on Capitol Hill is defending President Barack Obama’s plan to bar banks from participating in alternative investments while stressing the need to coordinate regulation internationally.

Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, shot back at Republican critics who say the president’s plan would imperil the U.S. financial services industry.

“I believe this is wrong,” Frank said in announcing he would attend this week’s World Economic Forum in Davos, Switzerland. “Combined with our coordination efforts with the European Union, United Kingdom, Japan, Canada and other major economic powers, I am confident we can create a situation in which we can impose appropriate tough regulation, without fear of loss of business to, or a destabilizing effect from, nations that will not join us.”

So far, there are none of those. The U.K. government has explicitly ruled out banning banks from owning, investing in or sponsoring hedge funds or private equity funds, although the opposition Conservative Party—widely tipped to win this year’s British elections—have expressed support for Obama’s plan. Nor is the European Union likely to go along with it, a source close to the situation told Reuters.

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