Reuters reports that White House Economic Council Paul Volcker will propose that Congress curb risky lending and spending by big banks to prevent the “too big to fail” scenario which led to taxpayer-financed bailouts of big businesses in 2008 and 2009. As the Obama administration begins it’s big push for financial regulatory reform, Volcker’s voice will become increasingly critical to the outcome and passage of reform legislation.

President Obama unexpectedly called for strong measures to reign in big banks and other financial institutions to prevent them from growing into companies which would be “too big to fail”. As Fed Chairman in the early 1980s, Volcker’s actions and monetary policy decisions curbed the painful stagflation of the late 1970s.

President Barack Obama stunned financial markets in late January by calling for new limits on banks’ ability to do “proprietary trading,” or buying and selling of investments for their own accounts unrelated to customers.

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“Every banker I speak with knows very well what ‘proprietary trading’ means and implies,” Volcker will tell the committee, according to the written testimony.

“My understanding is that only a handful of large commercial banks — maybe four or five in the United States and perhaps a couple of dozen worldwide — are now engaged in this activity in volume,” he will say.

“In the past, they have sometimes explicitly labeled a trading affiliate or division as ‘proprietary,’ with the connotation that the activity is, or should be, insulated from customer relations.”

Another area where the Obama administation will be focusing is the management of hedge funds.

Photo (via Daily Candor)