New bank rules unlikely to hurt big institutions

President Obama's latest effort to reel in big banks may have more bark than bite. Obama has proposed a tax on banks to get back billions in bailout money that was handed out at the height of the financial crisis in 2008. But analysts say that Obama's plan to limit banks' size and risky trading would have only a marginal effect on institutions like JPMorgan Chase, Bank of America and Citigroup–and would be hard to enforce. And it's not clear the rules would reduce taxpayers' risk of having to bail out another big bank. Attention has centered on Obama's effort to prevent the biggest banks from doing what's called proprietary trading. That's when banks use their own money to make high-risk bets. If those bets go bad and a bank goes under, taxpayers could be on the hook. One reason is that most big banks derive only a tiny fraction of their revenue from proprietary trading. At JPMorgan Chase & Co. and Bank of America Corp., for instance, proprietary trading brings in 1-2 percent of revenue, according to a Citigroup report. Less than 5 percent of Citi's revenue comes from proprietary trading. The figure is 3-4 percent for Morgan Stanley and less than 1 percent at Wells Fargo & Co. Douglas Elliott, of the Brookings Institution, told the AP: "Proprietary investment restrictions probably won't have a huge impact on most banks. That's a pretty small part of what banks do." Citing banks' limited proprietary trading activity, Citigroup analysts Keith Horowitz and Ryan O'Connell also say that the effect of Obama's proposal "may be less severe than expected."